As filed with the Securities and Exchange Commission on April 30, 1996.
Registration No. 33-95354
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
Kansas City Life Variable Life Separate Account
(Exact name of trust)
KANSAS CITY LIFE INSURANCE COMPANY
(Name of depositor)
3520 Broadway
Kansas City, Missouri 64141-6139
(Complete address of depositor's principal executive offices)
C. John Malacarne
Kansas City Life Insurance Company
3520 Broadway
Kansas City, Missouri 64141-6139
(Name and complete address of agent for service)
Copy to:
Stephen E. Roth, Esq.
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) of Rule 485
_X_ On May 1, 1996 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on (date) pursuant to paragraph (a)(1) of Rule 485
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant has elected to register an indefinite amount of the securities
being offered. Registrant's Rule 24f-2 declaration took effect on January 5,
1996. Accordingly, no Rule 24f-2 Notice is required to be filed for the
fiscal year ended Decmeber 31, 1995.
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT
KANSAS CITY LIFE INSURANCE COMPANY
Cross Reference to Items Required by Form N-8B-2
N-8B-2 Item Caption in Prospectus
1 Cover Page
2 Cover Page
3 Not applicable
4 Sale of the Contracts
5 Kansas City Life Variable Life Separate Account
6 Kansas City Life Variable Life Variable Account
7 Not applicable
8 Not applicable
9 Legal Matters
10 Summary and Diagram of the Contract; Premium Payments and
Allocations; Addition, Deletion or Substitution of Investments; Voting Rights
11 The Funds
12 The Funds
13 Charges and Deductions
14 Premium Payments and Allocations
15 Premium Payments and Allocations
16 The Funds
17 Surrender Privilege; Withdrawal of Cash Surrender Value
18 Kansas City Life Variable Life Separate Account
19 Reports to Contract Owners
20 Not Applicable
21 Contract Loans
22 Not applicable
23 Not applicable
24 Not applicable
25 Kansas City Life Insurance Company
26 Not applicable
27 Kansas City Life Insurance Company
28 Kansas City Life Directors and Executive Officers
29 Not applicable
30 Not applicable
31 Not applicable
32 Not applicable
33 Not applicable
34 Not applicable
35 Not applicable
36 Not applicable
37 Not applicable
38 Sale of Contracts
39 Sale of Contracts
40 Sale of Contracts
41 Not applicable
42 Not applicable
43 Not applicable
44 Determining the Contract Value
45 Not applicable
46 Not applicable
47 General Information About Kansas City Life, the Variable Account and
the Funds
48 Not applicable
49 Not applicable
50 The Variable Account
51 Premium Payments and Allocations; Death Benefit and Changes in
Specified Amount; Sale of the Contracts
52 Addition, Deletion or Substitution of Investments
53 Not applicable
54 Not applicable
55 Illustration of Contract Values, Cash Surrender Value, Death Benefits
and Accumulated Premium Payments
56 Illustration of Contract Values, Cash Surrender Value, Death Benefits
and Accumulated Premium Payments
57 Illustration of Contract Values, Cash Surrender Value, Death Benefits
and Accumulated Premium Payments
58 Not applicable
59 Financial Statements
PART I
Information Required in Prospectus
PROSPECTUS
Individual Flexible Premium Variable Life Insurance Contracts
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT OF
KANSAS CITY LIFE INSURANCE COMPANY
Home Office:
3520 Broadway
Kansas City, Missouri 64111-2565
Telephone (816) 753-7000
Correspondence to:
Variable Administration
P. O. Box 419364
Kansas City, Missouri 64141-6364
Telephone (800) 616-3670
This Prospectus describes an individual flexible premium variable
life insurance contract (the "Contract") offered by Kansas City
Life Insurance Company ("Kansas City Life," "we," "us" or
"our"). The Contract is designed to provide insurance
protection on the Insured named in the Contract, and at the same
time provide you with the flexibility to vary the amount and
timing of premium payments and to change the amount of death
benefits payable under the Contract. This flexibility allows
you to provide for your changing insurance needs under a single
insurance contract.
You also have the opportunity to allocate Net Premium payments
and Contract Value to one or more Subaccounts of the Kansas City
Life Variable Life Separate Account (the "Variable Account") and
to Kansas City Life's general account (the "Fixed Account"),
within limits. This Prospectus generally describes only that
portion of the Contract Value allocated to the Variable Account.
For a brief summary of the Fixed Account, see "Fixed Account,"
page 21. The assets of each Subaccount are invested in a
corresponding portfolio (each, a "Portfolio") of MFS Variable
Insurance Trust ("MFS Trust"), of TCI Portfolios, Inc. ("TCI
Portfolios"), and of Federated Insurance Series. (MFS
Trust, TCI Portfolios, and Federated Insurance Series are each referred to
as a "Fund"). Each Fund is managed by the investment adviser shown
below:
MFS Variable Insurance Trust
MFS Research Series
MFS Emerging Growth Series
MFS Total Return Series
MFS Bond Series
MFS World Governments Series
MFS Utilities Series
Manager
Massachusetts Financial Services Company
TCI Portfolios
(a member of the Twentieth Century Family of Funds)
TCI Growth Portfolio
TCI International Portfolio
Manager
Investors Research Corporation
Federated Insurance Series
Federated American Leaders Fund II
Federated High Income Bond Fund II
Federated Prime Money Fund II
Manager
Federated Advisers
The accompanying prospectuses for MFS Trust, TCI Portfolios, and
Federated Insurance Series describe their respective Portfolios,
including the risks of investing in the Portfolios, and provide
other information on MFS Trust, TCI Portfolios, and
Federated Insurance Series.
You can select from two Coverage Options available under the
Contract: a level death benefit ("Option A") and a death
benefit that fluctuates with the Contract Value ("Option B").
Kansas City Life guarantees that the Death Benefit proceeds will never be
less than the Specified Amount of insurance (less any
Indebtedness and past due charges) so long as sufficient
premiums are paid to keep the Contract in force.
The Contract provides for a Cash Surrender Value that can be
obtained by surrendering the Contract. Because this value is
based on the performance of the Portfolios of the Funds, to the
extent of allocations to the Variable Account, there is no
guaranteed minimum Cash Surrender Value.
If the Cash Surrender Value is insufficient to cover the charges
due under the Contract, the Contract will lapse without value.
However, Kansas City Life guarantees to keep the Contract in
force during the Guaranteed Payment Period, so long as the
Guaranteed Monthly Premium requirement and other conditions have
been met. The Contract also permits loans and partial
surrenders, within limits.
It may not be advantageous to replace existing insurance with
this Contract. Within certain limits, you may return the
Contract, or convert it to a contract that provides benefits
that do not vary with the investment results of a separate
account by exercising the Special Transfer Right.
THIS PROSPECTUS PRESENTS CONCISELY THE INFORMATION YOU SHOULD
KNOW BEFORE DECIDING TO PURCHASE A CONTRACT. IT SHOULD BE
RETAINED FOR FUTURE REFERENCE. PROSPECTUSES FOR MFS VARIABLE
INSURANCE TRUST, TCI PORTFOLIOS, INC., AND FEDERATED INSURANCE SERIES
MUST ACCOMPANY THIS PROSPECTUS AND SHOULD BE READ IN
CONJUNCTION WITH THIS PROSPECTUS.
AN INVESTMENT IN THE CONTRACT IS NOT A DEPOSIT OR OBLIGATION OF,
OR GUARANTEED OR ENDORSED BY, ANY BANK, NOR IS THE CONTRACT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE CONTRACT
INVOLVES CERTAIN RISKS, INCLUDING THE LOSS OF PREMIUM PAYMENTS
(PRINCIPAL).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Date of this Prospectus is May 1, 1996.
PROSPECTUS CONTENTS
Page
DEFINITIONS OF TERMS...
SUMMARY AND DIAGRAM OF THE CONTRACT...
GENERAL INFORMATION ABOUT KANSAS CITY LIFE, THE VARIABLE
ACCOUNT AND THE FUNDS...
Kansas City Life Insurance Company...
Kansas City Life Variable Life Separate Account...
The Funds...
Resolving Material Conflicts...
Addition, Deletion or Substitution of Investments...
Voting Rights...
PREMIUM PAYMENTS AND ALLOCATIONS...
Applying for a Contract...
Free Look Right to Cancel Contract...
Premiums...
Premium Payments to Prevent Lapse...
Premium Allocations and Crediting...
Transfer Privilege...
Dollar Cost Averaging Plan...
Portfolio Rebalancing Plan...
FIXED ACCOUNT...
Minimum Guaranteed and Current Interest Rates...
Calculation of Fixed Account Value...
Transfers from Fixed Account...
Payment Deferral...
CHARGES AND DEDUCTIONS...
Premium Expense Charge...
Monthly Deduction...
Monthly Expense Charge...
Daily Mortality and Expense Risk Charge...
Transfer Processing Fee...
Surrender Charge...
Partial Surrender Fee...
Fund Expenses...
Cost of Additional Benefits Provided by Riders...
Bonus on Contract Value in the Variable Account...
Other Tax Charge...
HOW YOUR CONTRACT VALUES VARY...
Determining the Contract Value...
Cash Surrender Value...
DEATH BENEFIT AND CHANGES IN SPECIFIED AMOUNT...
Amount of Death Benefit Proceeds...
Coverage Options...
Initial Specified Amount and Coverage Option...
Changes in Coverage Option...
Changes in Specified Amount...
Selecting and Changing the Beneficiary...
CASH BENEFITS...
Contract Loans...
Surrendering the Contract for Cash Surrender Value...
Partial Surrenders...
Maturity Benefit...
Payment Options...
Specialized Uses of the Contracts
ILLUSTRATIONS OF CONTRACT VALUES, CASH SURRENDER VALUES,
DEATH BENEFITS AND ACCUMULATED PREMIUM PAYMENTS...
OTHER CONTRACT BENEFITS AND PROVISIONS...
Limits on Rights to Contest the Contract...
Changes in the Contract or Benefits...
When Proceeds Are Paid...
Reports to Contract Owners...
Assignment...
Reinstatement...
Supplemental and/or Rider Benefits...
TAX CONSIDERATIONS...
Tax Status of the Contract...
Tax Treatment of Contract Benefits...
Possible Charge for Kansas City Life's Taxes...
OTHER INFORMATION ABOUT THE CONTRACTS AND KANSAS CITY LIFE...
Sale of the Contracts...
Kansas City Life Directors and Executive Officers...
State Regulation...
Additional Information...
Experts...
Litigation...
Legal Matters...
Financial Statements...
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE.
NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THE OFFERING OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, THE PROSPECTUSES OF THE FUNDS, OR THE STATEMENTS OF
ADDITIONAL INFORMATION OF THE FUNDS.
DEFINITIONS OF TERMS
Accumulation Unit - An accounting unit used to calculate
Variable Account Value. It is a measure of the net investment
results of each of the Subaccounts.
Age - Age means the age on the Insured's last birthday as of
each Contract Anniversary. The Contract is issued at the Age
shown in the Contract, which is the Insured's Age on the
Contract Date. If the Contract Date falls on the birthday of
the Insured, the Age will be the age attained by the Insured on
the Contract Date.
Allocation Date - The date on which the initial Net Premium is
allocated to the Federated Prime Money Fund II Subaccount. The Allocation
Date is the later of the date when all underwriting and other
requirements have been met and your application has been
approved, or the date the initial premium is received at the
Home Office.
Beneficiary - The Beneficiary is the person you have designated
in the application or in the last beneficiary designation filed
with us to receive any proceeds payable under the Contract at
the death of the Insured.
Cash Surrender Value - The Contract Value at the time of
surrender less any applicable Surrender Charge and any Contract
Indebtedness.
Contract Anniversary - The same day and month as the Contract
Date each year that the Contract remains in force.
Contract Date - The date on which coverage under the Contract
takes effect. Contract Months, Years and Anniversaries are
measured from the Contract Date. The incontestability and
suicide periods for the Initial Specified Amount are measured
from this date.
Contract Value - The sum of the Variable Account Value and the
Fixed Account Value (including the Loan Account Value).
Calculation of the Contract Value is described on page 28.
Contract Year - Any period of twelve months starting with the
Contract Date and each Contract Anniversary thereafter.
Coverage Options - Option A provides a Death Benefit at least
equal to the Specified Amount at the time of death. Option B
provides a Death Benefit at least equal to the Specified Amount
plus the Contract Value, both at the time of death.
Death Benefit Proceeds - The amount of Proceeds payable upon the
Insured's death. The Death Benefit is determined according to
the Coverage Option that has been elected. Any Indebtedness is
deducted from the amount payable.
Fixed Account - An account that is part of our General Account,
and is not part of or dependent on the investment performance of
the Variable Account.
Fixed Account Value - The Contract Value in the Fixed Account.
Guaranteed Monthly Premium - An amount used to measure premium
payments paid for purposes of determining whether the guarantee
that your Contract will not lapse during the Guaranteed Payment
Period is in effect. See page 18.
Guaranteed Payment Period - The period of time during which we
guarantee that your Contract will not lapse if the Guaranteed
Monthly Premiums are paid. See page 18.
Home Office - 3520 Broadway, P.O. Box 419364, Kansas City,
Missouri 64141-6364.
Indebtedness - The sum of all outstanding Contract loans plus
accrued interest.
Initial Specified Amount - The Specified Amount on the Contract
Date.
Insured - The person whose life is insured under the Contract.
Lapse - Termination of the Contract at the expiration of the
Grace Period while the Insured is still living. See page 19.
Loan Account - The Loan Account is part of the Fixed Account,
which is part of the General Account.
Loan Account Value - The Contract Value in the Loan Account.
Maturity Date - The date when coverage terminates and the Cash
Surrender Value, if any, is paid.
Monthly Anniversary Day - The day of each month as of which we
make the Monthly Deduction. It is the same day of each month as
the Contract Date or the last day of the month for those months
not having such a day.
Monthly Deduction - The amount we deduct as of each Monthly
Anniversary Day from the Contract Value to pay the cost of
insurance charge, monthly expense charge, any applicable
increase expense charge, and any charges for supplemental and/or
rider benefits for the month beginning on that Monthly
Anniversary Day.
Net Investment Factor - An index used to measure Subaccount
performance of the current Valuation Period. Subaccount
performance includes gains or losses in the Subaccounts,
dividends paid, any capital gains or losses, any taxes, and
mortality and expense risk charges. The calculation of the Net
Investment Factor is described on page 28.
Net Premium - A premium payment minus the applicable Premium
Expense Charge. See page 23.
Owner, You - The person entitled to exercise all rights and
privileges provided in the Contract.
Planned Premium Payments - The amount and frequency of premium
payments you elected to pay in your last application. This is
the amount we will bill you and is only an indication of your
preferences of future premium payments. You may change the
amount and frequency of premium payments at any time. The
actual amount and frequency of premium payments will affect the
Contract Value and the amount and duration of insurance.
Premium Payment(s) - The amount(s) paid by the Owner to purchase
the Contract; either a Planned Premium Payment or unscheduled
premium.
Proceeds - The total amount we are obligated to pay under the
terms of the Contract.
Reallocation Date - The date as of which Contract Value in the
Federated Prime Money Fund II Subaccount is allocated to the Subaccounts and
to the Fixed Account based on the Net Premium allocation
percentages specified in the application. The Reallocation Date
is 30 days after the Allocation Date.
Specified Amount - The amount of insurance coverage on the
Insured. The actual Death Benefit will depend upon whether
Option A or Option B is in effect at the time of death.
Subaccounts - The division of accounts making up the Variable
Account. The assets of each Subaccount are invested in a
corresponding portfolio of a designated mutual fund.
Subaccount Value - The Contract Value in a Subaccount.
Unscheduled Premium - Any premium other than a Planned Premium
Payment.
Valuation Day - Each day on which both the New York Stock
Exchange and Kansas City Life are open for business.
Valuation Period - The interval of time commencing at the close
of business one Valuation Day and ending at the close of
business on the next succeeding Valuation Day.
Variable Account - The Kansas City Life Variable Life Separate
Account. This is not part of our General Account. The Variable
Account has Subaccounts.
Variable Account Value - The total value of a Contract allocated
to Subaccounts of the Variable Account.
Written Notice - A written notice in a form satisfactory to Kansas City Life
that is signed by the Owner and received at the Home Office.
SUMMARY AND DIAGRAM OF THE CONTRACT
The following summary of Prospectus information and diagram of
the Contract should be read in conjunction with the detailed
information appearing elsewhere in this Prospectus. Unless
otherwise indicated, the description of the Contract in this
Prospectus assumes that the Contract is in force and there is no
outstanding Contract Indebtedness.
The Contract is similar in many ways to fixed-benefit life
insurance. As with fixed-benefit life insurance, the Owner of a
Contract pays premium payments for insurance coverage on the
person insured. Also like fixed-benefit life insurance, the
Contract provides for accumulation of Net Premiums and a Cash
Surrender Value that is payable if the Contract is surrendered
during the Insured's lifetime. As with fixed-benefit life
insurance, the Cash Surrender Value during the early Contract
Years is likely to be substantially lower than the premium
payments paid.
However, the Contract differs from fixed-benefit life insurance
in several important respects. Unlike fixed-benefit life
insurance, the Death Benefit may and the Contract Value will
increase or decrease to reflect the investment performance of
the Subaccounts to which Contract Value is allocated. Also,
there is no guaranteed minimum Cash Surrender Value.
Nonetheless, Kansas City Life guarantees to keep the Contract in
force during the first five Contract Years and during the five
years following the effective date of an increase in the
Specified Amount as long as the Guaranteed Monthly Premium
requirement has been met. See "Guaranteed Payment Period and
Guaranteed Monthly Premium," page 18. Otherwise, if the Cash
Surrender Value is insufficient to pay charges due, the Contract
will lapse without value after a grace period. See "Premium
Payments to Prevent Lapse," page 19. If a Contract lapses
while loans are outstanding, adverse tax consequences may
result. See "Tax Considerations," page 47.
The most important features of the Contract, such as charges,
cash surrender benefits, death benefits, and calculation of
Contract values, are summarized in the diagram on the following
pages.
Purpose of the Contract. The Contract is designed to provide
long-term insurance benefits, and may also provide long-term
accumulation of Contract Value. The Contract should be
evaluated in conjunction with other insurance policies that you
own, as well as the need for insurance and the Contract's
long-term investment potential. It may not be advantageous to
replace existing insurance coverage with this Contract. In
particular, replacement should be carefully considered if the
decision to replace existing coverage is based solely on a
comparison of Contract illustrations. (See "Illustrations" below
and "Specialized Uses of the Contract" on page ).
Illustrations. Illustrations in this Prospectus or used in
connection with the purchase of a Contract are based on
hypothetical rates of return. These rates are not guaranteed.
They are illustrative only and should not be deemed a
representation of past or future performance. Actual rates of
return may be higher or lower than those reflected in Contract
illustrations, and therefore, actual Contract values will be
different from those illustrated.
The illustrations show Contract values based on current
charges and, alternatively, based on guaranteed charges. See
"Illustrations of Contract Values, Cash Surrender Values,
Death Benefits and Accumulated Premium Payments," page 34.
Contract values in the illustrations based on current charges
reflect a bonus that may be credited to the Contract beginning in the
eleventh Contract Year. The bonus is not guaranteed and will be
paid in Kansas City Life's sole discretion.
Contract Tax Compliance. Kansas City Life intends for the
Contract to satisfy the definition of a life insurance contract
under Section 7702 of the Internal Revenue Code. Under certain
circumstances, a Contract will be treated as a "modified
endowment contract" under federal tax law. Kansas City Life
will monitor Contracts and will notify you on a timely basis if
your Contract is in jeopardy of violating the definition of life
insurance or becoming a modified endowment contract. For
further discussion of the tax status of a Contract and the tax
consequences of being treated as a life insurance contract or a
modified endowment contract, see "Tax Considerations," page 47.
Free Look Right to Cancel and Special Transfer Right. For a
limited time, you have the right to cancel your Contract and
receive a refund. See "Free Look Right to Cancel Contract,"
page 17. During this "free-look" period, Net Premiums will be
allocated to the Federated Prime Money Fund II Subaccount until the
Reallocation Date. See "Premium Allocations and Crediting," page 19. In
addition, for a limited time after requesting an increase in the Contract's
Specified Amount, you may cancel the increase and you may be entitled to a
refund of certain charges.
Once within the first 24 Contract Months or within 24 Contract
Months following the effective date of an increase in Specified
Amount, you may transfer all or a portion of the Variable
Account Value to the Fixed Account without payment of any
transfer fee. This transfer effectively "converts" the Contract
into a contract that provides fixed (non-variable) benefits.
See "Special Transfer Right," page 20.
Owner Inquiries. If you have any questions, you may write or
call Kansas City Life's Home Office at 3520 Broadway, P.O. Box
419364, Kansas City, Missouri 64141-6364, 1-800-616-3670.
DIAGRAM OF CONTRACT
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PREMIUM PAYMENTS
You select a payment plan but are not required to pay premium
payments according to the plan. You can vary the amount and
frequency and can skip planned premium payments. See page 18
for rules and limits.
The Contract's minimum initial premium payment and planned
premium payment depend on the Insured's age, sex and risk class,
Initial Specified Amount selected, any supplemental and/or rider
benefits, and any planned periodic premiums you plan to make.
Unplanned premium payments may be made, within limits. See
page 18.
Under certain circumstances, which include taking excessive
Contract loans, extra premium payments may be required to
prevent lapse. See page 19.
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DEDUCTIONS FROM PREMIUM PAYMENTS
For state and local premium taxes (2.25% of premium payments).
See page 23.
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NET PREMIUM PAYMENTS
You direct the allocation of Net Premium payments among eleven
Subaccounts of the Variable Account and the Fixed Account. See
page 19 for rules and limits on Net Premium payment allocations.
Each Subaccount invests in a corresponding portfolio of a
mutual fund:
Mutual Fund
MFSr Variable Insurance Trustsm
Manager: Massachusetts Financial Services Company
Portfolio
MFS Research Series
MFS Emerging Growth Series
MFS Total Return Series
MFS Bond Series
MFS World Governments Series
MFS Utilities Series
TCI Portfolios (a member of the Twentieth Century Family of Funds)
Manager: Investors Research Corporation
TCI Growth Portfolio
TCI International Portfolio
Federated Insurance Series
Manager: Federated Advisers
Federated American Leaders Fund II
Federated High Income Bond Fund II
Federated Prime Money Fund II
Interest is credited on amounts allocated to the Fixed Account
at a minimum guaranteed rate of 4%. See page 22 for rules and
limits on transfers from the Fixed Account allocations.
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DEDUCTIONS FROM CONTRACT VALUE
Monthly deduction for cost of insurance, administration fees, and charges
for any supplemental and/or rider benefits.
Administration fees are currently $26.00 per month for the first
Contract Year and $6.00 per month thereafter, plus $20.00 per
month for the 12 Contract Months following an increase in
Specified Amount. See page 23.
DEDUCTIONS FROM ASSETS
Daily charge at a guaranteed annual rate of 0.90% from the
Subaccounts for mortality and expense risks. See page 25.
This charge is not deducted from the Fixed Account Value.
Investment advisory fees and operating expenses are deducted
from the assets of each Portfolio. See page 27.
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CONTRACT VALUE
Contract Value is equal to Net Premiums, as adjusted each
Valuation Day to reflect Subaccount investment experience,
interest credited on Fixed Account Value, charges deducted and
other Contract transactions (such as transfers and surrenders).
See page 28.
Varies from day to day. There is no minimum guaranteed
Contract Value. The Contract may lapse if the Contract Value is
insufficient to cover a Monthly Deduction due. See page 28.
Can be transferred among the Subaccounts and Fixed Account. A transfer
fee of $25.00 will apply if more than 6 transfers are
made in a Contract Year. See page 20 for rules and limits.
Is the starting point for calculating certain values under a
Contract, such as the Cash Surrender Value and the Death Benefit
used to determine Death Benefit proceeds.
Also, a "bonus" may be credited to the Contract Value on each Monthly
Anniversary Day beginning in the eleventh Contract Year. The monthly bonus
equals 0.0375% (0.45% on an annualized basis) of the Variable Account Value.
This bonus is not guaranteed.
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CASH BENEFITS
Loans may be taken for amounts up to Cash Surrender Value less loan
interest to the next Contract Anniversary, at an annual
effective interest rate of 6.0%. Currently, a preferred loan is
available beginning in the eleventh Contract Year. See page 31
for rules and limits.
Partial surrenders generally can be made provided there is
sufficient remaining Cash Surrender Value. A partial surrender
fee will apply and a surrender charge will be assessed for any
resulting reduction in the Specified Amount. See page 33 for
limits and a description of the charges. Partial surrenders may
be subject to adverse tax consequences.
The Contract may be surrendered in full at any time for its
Cash Surrender Value. A sales load charge of up to
30% of actual premiums paid up to a maximum premium amount shown
in the Contract, as well as a declining administrative charge,
will apply during the first 15 Contract Years and during the 15
years following the effective date of an increase in the
Specified Amount. See page 33. Surrenders may be subject to
adverse tax consequences.
Payment options are available. See page 33.
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DEATH BENEFITS
Income tax free to Beneficiary.
Available as lump sum or under a variety of payment options.
For all Contracts, a minimum Specified Amount of $100,000 for Issue Ages
0-49 and $50,000 for Issue Ages 50-80. We may allow these minimum limits to be
reduced. See page 17.
Two Coverage Options available:
Option A, at least equal to the Specified Amount, and Option B, at least
equal to the Specified Amount plus Contract Value. See page 29.
Flexibility to change the Coverage Option and Specified
Amount. See pages 30 for rules and limits.
Supplemental and/or rider benefits may be available. See page 45.
Any Indebtedness is deducted from the amount payable.
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GENERAL INFORMATION
ABOUT KANSAS CITY LIFE, THE VARIABLE ACCOUNT
AND THE FUNDS
Kansas City Life Insurance Company
The Contracts are issued by Kansas City Life Insurance Company,
which is a stock life insurance company organized under the laws
of the State of Missouri in 1895. Kansas City Life is currently
licensed to transact life insurance business in 47 states and
the District of Columbia.
Kansas City Life is subject to regulation by the Department of
Insurance of the State of Missouri as well as by the insurance
departments of all other states and jurisdictions in which it
does business. We submit annual statements on our operations
and finances to insurance officials in such states and
jurisdictions. The forms for the Contract described in this
Prospectus are filed with and (where required) approved by
insurance officials in each state and jurisdiction in which
Contracts are sold.
Kansas City Life Variable Life Separate Account
Kansas City Life Variable Life Separate Account was established
as a separate investment account under Missouri law on April 24,
1995. It is used to support the Contracts and may be used to
support other variable life insurance contracts, and for other
purposes permitted by law. The Variable Account is registered
with the Securities and Exchange Commission ("SEC") as a unit
investment trust under the Investment Company Act of 1940 (the
"1940 Act") and is a "separate account" within the meaning of
the federal securities laws. Kansas City Life has established
other separate investment accounts that may also be registered
with the SEC.
The Variable Account is divided into Subaccounts. The
Subaccounts available under the Contracts invest in shares of
Portfolios of the Funds. The Variable Account may include other
Subaccounts that are not available under the Contracts and are
not otherwise discussed in this Prospectus. The assets in the
Variable Account are owned by Kansas City Life.
Income, gains and losses, realized or unrealized, of a Subaccount
are credited to or charged against the Subaccount
without regard to any other income, gains or losses of Kansas
City Life. Applicable insurance law provides that assets equal
to the reserves and other contract liabilities of the Variable
Account are not chargeable with liabilities arising out of any
other business of Kansas City Life. Kansas City Life is
obligated to pay all benefits provided under the Contracts.
The Funds
MFSr Trust, TCI Portfolios, and Federated Insurance Series are each registered
with the SEC as a diversified open-end management investment company
under the 1940 Act, although the SEC does not supervise their
management or investment practices and policies. Each of the
Funds is a series fund-type mutual fund made up of the
Portfolios and other series that are not available under the
Contracts. The investment objectives of each of the Portfolios
is described below.
MFSr Variable Insurance Trustsm
(Manager: Massachusetts Financial Services Company)
MFSr Research Seriessm. The Research Series' investment objective
is to provide long-term growth of capital and future income.
The Series' assets are allocated to selected economic sectors
and then to industry groups within those sectors.
MFSr Emerging Growth Seriessm. The Emerging Growth Series seeks to provide
long-term growth of capital. Dividend and interest income from portfolio
securities, if any, is incidental to the Series' investment objective of long-
term growth of capital. The Series' policy is to invest primarily (i.e., at
least 80% of its assets under normal circumstances) in common stocks of
companies that MFS believes are early in their life cycle but which have the
potential to become major enterprises (emerging growth companies).
MFSr Total Return Seriessm. The Total Return Series' primary
investment objective is to obtain above-average income (compared
to a portfolio entirely invested in equity securities)
consistent with the prudent employment of capital, and its
secondary objective is to provide a reasonable opportunity for
growth of capital and income, since many securities offering a
better than average yield may also possess growth potential.
MFSr Bond Seriessm. The Bond Series' primary investment objective
is to provide as high a level of current income as is believed
to be consistent with prudent investment risk. The Series'
secondary objective is to protect shareholders' capital. Up to
20% of the Series' total assets may be invested in lower-rated
or non-rated debt securities commonly known as "junk bonds."
The risks of investing in junk bonds are described in the
prospectus for the MFSr Variable Insurance Trust, which should be
read carefully before investing.
MFSr World Governments Seriessm. The World Governments Series'
investment objective is to seek not only preservation, but also
growth of capital, together with moderate current income. The
Series seeks to achieve its investment objective through a
professionally managed, internationally diversified portfolio
consisting primarily of debt securities and to a lesser extent
equity securities.
MFSr Utilities Seriessm. The Utilities Series' investment
objective is to seek capital growth and current income (income
above that available from a portfolio invested entirely in
equity securities). The Series will seek to achieve its
objective by investing, under normal circumstances, at least 65%
(but up to 100% at the discretion of the Series' adviser) of its
assets in equity and debt securities of both domestic and
foreign companies in the utilities industry.
TCI Portfolios, Inc.
A member of the Twentieth Century Family of Mutual Funds
(Manager: Investors Research Corporation)
TCI Growth Portfolio. The investment objective of TCI Growth
Portfolio is capital growth. The Portfolio will seek to achieve
its investment objective by investing primarily in common stocks
that are considered by the investment adviser to have
better-than-average prospects for appreciation.
TCI International Portfolio. The investment objective of TCI
International Portfolio is capital growth. The Portfolio will
seek to achieve its investment objective by investing primarily
in securities of foreign companies that meet certain fundamental
and technical standards of selection and that have, in the
opinion of the investment manager, potential for appreciation.
Federated Insurance Series (formerly known as Insurance Management Series)
(Manager: Federated Advisers)
Federated American Leaders Fund II (formerly known as IMS Equity Growth and
Income Fund). The primary investment objective of the Federated American
Leaders Fund II is to achieve long-term growth of capital. The Fund's secondary
objective is to provide income. The Fund pursues its investment objectives
by investing, under normal circumstances, at least 65% of its total assets in
common stock of "blue-chip" companies, which are generally top-quality,
established growth companies.
Federated High Income Bond Fund II (formerly known as IMS Corporate Bond Fund).
The investment objective of the Federated High Income Bond Fund II is to seek
high current income. The Fund endeavors to achieve its objective by investing
primarily in lower-rated corporate debt obligations commonly referred to as
"junk bonds." The risks of investing in junk bonds is described in the
prospectus for Federated Insurance Series, which should be read carefully before
investing.
Federated Prime Money Fund II (formerly known as IMS Prime Money Fund). The
investment objective of the Federated Prime Money Fund II is to provide current
income consistent with stability of principal and liquidy. The Fund pursues
its investment objective by investing exclusively in a portfolio of money
market instruments maturing in 397 days or less.
THERE IS NO ASSURANCE THAT THE STATED OBJECTIVES AND POLICIES OF
ANY OF THE FUNDS WILL BE ACHIEVED.
More detailed information concerning the investment objectives,
policies, and restrictions pertaining to the Funds and
Portfolios and their expenses, investment advisory services and
charges and the risks involved with investing in the Portfolios
and other aspects of their operations can be found in the
current prospectus for each Fund or Portfolio that accompanies
this Prospectus and the current Statement of Additional
Information for each Fund or Portfolio. The prospectuses for
the Funds or Portfolios should be read carefully before any
decision is made concerning the allocation of Net Premium
payments or transfers among the Subaccounts.
Kansas City Life has entered into agreements with either the
investment adviser or distributor for each of the Funds pursuant
to which the adviser or distributor will pay Kansas City Life a
fee based upon an annual percentage of the average aggregate net
amount invested by Kansas City Life on behalf of the Variable
Account and other separate accounts of Kansas City Life. These
agreements reflect administrative services provided by Kansas
City Life.
Kansas City Life cannot guarantee that each Fund or Portfolio
will always be available for the Contracts, but in the unlikely
event that a Fund or Portfolio is not available, Kansas City
Life will take reasonable steps to secure the availability of a
comparable fund. Shares of each Portfolio are purchased and
redeemed at net asset value, without a sales charge.
Resolving Material Conflicts
The Funds presently serve as the investment medium for the
Contracts. In addition, the Funds are available to registered
separate accounts of insurance companies, other than Kansas City
Life, offering variable annuity and variable life insurance
contracts.
We do not currently foresee any disadvantages to you resulting
from the Funds selling shares to fund products other than the
Contracts. However, there is a possibility that a material
conflict of interest may arise between Owners whose Contract
Values are allocated to the Variable Account and the owners of
variable life insurance policies and variable annuity contracts
issued by other companies whose values are allocated to one or
more other separate accounts investing in any one of the Funds.
Shares of some of the Funds may also be sold to certain
qualified pension and retirement plans qualifying under Section
401 of the Code. As a result, there is a possibility that a
material conflict may arise between the interests of Owners or
owners of other contracts (including contracts issued by other
companies), and such retirement plans or participants in such
retirement plans. In the event of a material conflict, we will
take any necessary steps, including removing the Variable
Account from that Fund, to resolve the matter. The Board of
Directors of each Fund will monitor events in order to identify
any material conflicts that may arise and determine what action,
if any, should be taken in response to those events or
conflicts. See the accompanying prospectuses for the Funds and
Portfolios for more information.
Addition, Deletion or Substitution of Investments
We reserve the right, subject to applicable law, to make
additions to, deletions from, or substitutions for the shares
that are held in the Variable Account or that the Variable
Account may purchase. If the shares of a Portfolio of a Fund
are no longer available for investment or if, in our judgment,
further investment in any Portfolio should become inappropriate
in view of the purposes of the Variable Account, we may redeem
the shares, if any, of that Portfolio and substitute shares of
another registered open-end management investment company. We
will not substitute any shares attributable to a Contract's
interest in a Subaccount of the Variable Account without notice
and prior approval of the SEC and state insurance authorities,
to the extent required by the 1940 Act or other applicable law.
We also reserve the right to establish additional Subaccounts of
the Variable Account, each of which would invest in shares
corresponding to a Portfolio of a Fund or in shares of another
investment company having a specified investment objective.
Subject to applicable law and any required SEC approval, we may,
in our sole discretion, establish new Subaccounts or eliminate
one or more Subaccounts if marketing needs, tax considerations
or investment conditions warrant. Any new Subaccounts may be
made available to existing Contract Owners on a basis to be
determined by Kansas City Life.
If any of these substitutions or changes are made, we may, by
appropriate endorsement, change the Contract to reflect the
substitution or change. If we deem it to be in the best
interests of Contract Owners (subject to any approvals that may
be required under applicable law), the Variable Account may be
operated as a management investment company under the 1940 Act,
it may be deregistered under that Act if registration is no
longer required, or it may be combined with other Kansas City
Life separate accounts.
Voting Rights
Kansas City Life is the legal owner of shares held by the
Subaccounts and as such has the right to vote on all matters
submitted to shareholders of the Funds. However, as required by
law, Kansas City Life will vote shares held in the Subaccounts
at regular and special meetings of shareholders of the Funds in
accordance with instructions received from Owners with Contract
Value in the Subaccounts. Should the applicable federal
securities laws, regulations or interpretations thereof change,
Kansas City Life may be permitted to vote shares of the Funds in
its own right, and if so, Kansas City Life may elect to do so.
To obtain voting instructions from Owners, before a meeting
Owners will be sent voting instruction material, a voting
instruction form and any other related material. The number of
votes that are available to an Owner will be calculated
separately for each Subaccount of the Variable Account, and may
include fractional shares. The number of votes attributable to
a Subaccount will be determined by applying an Owner's
percentage interest, if any, in a particular Subaccount to the
total number of votes attributable to that Subaccount. The
number of votes for which an Owner may give instructions will be
determined as of the date coincident with the date established
by the Fund for determining shareholders eligible to vote at the
relevant meeting of the Fund. Shares held by a Subaccount for
which no timely instructions are received will be voted by
Kansas City Life in the same proportion as those shares for
which voting instructions are received.
Kansas City Life may, if required by state insurance officials,
disregard Owner voting instructions if such instructions would
require shares to be voted so as to cause a change in
sub-classification or investment objectives of one or more of
the Portfolios, or to approve or disapprove an investment
advisory agreement. In addition, Kansas City Life may under
certain circumstances disregard voting instructions that would
require changes in the investment advisory contract or
investment adviser of one or more of the Portfolios, provided
that Kansas City Life reasonably disapproves of such changes in
accordance with applicable federal regulations. If Kansas City
Life ever disregards voting instructions, Owners will be advised
of that action and of the reasons for such action in the next
semiannual report. Finally, Kansas City Life reserves the right
to modify the manner in which the weight to be given to
pass-through voting instructions is calculated when such a
change is necessary to comply with current federal regulations
or the current interpretation thereof.
PREMIUM PAYMENTS AND ALLOCATIONS
Applying for a Contract
To purchase a Contract, you must complete an application and
submit it through an authorized Kansas City Life agent. If you
are eligible for temporary insurance coverage, a temporary
insurance agreement ("TIA") should also accompany the
application. The TIA provides temporary insurance coverage
prior to the date when all underwriting and other requirements
have been met and your application has been approved, with
certain limitations, as long as an initial premium payment
accompanies the TIA. In accordance with Kansas City Life's
underwriting rules, temporary life insurance coverage may not
exceed $250,000. The TIA may not be in effect for more than 60
days. At the end of the 60 days, the TIA coverage terminates
and the initial premium will be returned to the applicant.
With the TIA, you must pay an initial premium payment at the
time of application that is at least equal to two Guaranteed
Monthly Premiums (one Guaranteed Monthly Premium is required for
Contracts when premium payments will be made under a
pre-authorized payment arrangement). See "Premiums," page 18. In general,
policies that are submitted with the required premium payment will have a
Contract Date which will be the date of the TIA. However, if the Contract Date
is calculated to be the 29th, 30th or 31st of the month then the date will be
set to the 1st of the next following month. For Contracts where premium is not
accepted at the time of application or Contracts where values are applied to the
new Contract from another contract, the Contract Date will be the approval date
plus up to two days, unless the approval is the 27th, 28th or 29th of the month
in which case then the Contract Date would be the first of the next month.
There are several exceptions to these rules, based on the type of billing,
whether the contract involves a conversion and/or whether the specified amount
exceeds $250,000.
Pre-Authorized Check Payment Plan (PAC) or Combined Billing (CB)--Premium With
Application
If PAC or CB is requested and the initial premium is taken with the application,
the Contract Date will be the later of the TIA date or the first of the month of
approval. Combined Billing is a billing where more than one Kansas City Life
contract is billed together.
Combined Billing (CB)--No Premium With Application
If CB is requested and the initial premium is not taken with the application,
the Contract Date will be the earlier of the 1st of the month after the Contract
is approved or the date the initial premium is received. However, if approval
occurs on the 1st, 2nd, 3rd, 4th or 5th of the month the Contract Date will be
the first of the same month that the Contract is approved. In addition, if
the Contract Date is calculated to be the 29th, 30th or 31st of the month
then the date will be set to the 1st of the following month.
Government Allotment (GA) and Federal Allotment (FA)
If GA or FA is requested on the application and an initial premium is taken with
the application, the Contract Date will be the 1st of the month of approval. If
GA or FA is requested and no initial premium is received the Contract Date will
be the first of the month for which a full monthly allotment is received.
Conversion
If a Kansas City Life term insurance product is converted to a new Contract, the
Contract Date will be the date that the previous contract was paid to. If there
is more than one term policy being converted, the Contract Date will be
determined by the contract with the earliest date that premiums were paid to.
Specified Amount Exceeds $250,000
If the specified amount requested exceeds $250,000 and an initial premium is
taken with the application, the Contract Date will be the later of the TIA date
or the 1st of the month of approval.
The Contract Date is determined by these guidelines except, as
provided for under state insurance law, the Owner may be
permitted to backdate the Contract to preserve insurance age.
In no case may the Contract Date be more than six months prior
to the date the application was completed. Monthly Deductions
will be charged from the Contract Date.
If coverage under an existing Kansas City Life insurance
contract is being replaced, that contract will be terminated and
values will be transferred on the date when all underwriting and
other requirements have been met and your application has been
approved. Kansas City Life will deduct Contract charges as of
the Contract Date.
Kansas City Life requires satisfactory evidence of the proposed
Insured's insurability, which may include a medical examination
of the proposed Insured. The available issue ages are 0 through
80 on a nonsmoker basis, 15 through 80 on a preferred nonsmoker
basis, and 15 through 80 on a smoker basis. Age is determined
on the Insured's age last birthday on the Contract Date. The
minimum Specified Amount is $100,000 for issue ages 0 through
49. The minimum Specified Amount is $50,000 for issue ages 50
through 80. Acceptance of an application depends on Kansas City
Life's underwriting rules, and Kansas City Life reserves the
right to reject an application.
As the Owner of the Contract, you may exercise all rights
provided under the Contract. The Insured is the Owner, unless a
different Owner is named in the application. The Owner may by
Written Notice name a contingent Owner or a new Owner while the
Insured is living. Unless a contingent Owner has been named, on
the death of the last surviving Owner, ownership of the Contract
passes to the estate of the last surviving Owner, who will
become the Owner if the Owner dies. The Owner may also be
changed prior to the Insured's death by Written Notice
satisfactory to us. A change in Owner may have tax
consequences. See "Tax Considerations," page 47.
Free Look Right to Cancel Contract
You may cancel your Contract for a refund during your
"free-look" period. This period expires 10 days after you
receive your Contract, 45 days after your application is signed,
or 10 days after Kansas City Life mails or delivers a
cancellation notice, whichever is latest. If you decide to
cancel the Contract, you must return it by mail or other
delivery method to the Home Office or to the authorized Kansas
City Life agent who sold it. Immediately after mailing or
delivery, the Contract will be deemed void from the beginning.
Within seven calendar days after Kansas City Life receives the
returned Contract, Kansas City Life will refund premiums paid.
In addition, you may cancel an increase in Specified Amount that
you have requested within 10 days after you receive the adjusted
Contract, within 45 days after the date the application for the
increased coverage is signed, or within 10 days after Kansas
City Life mails or delivers the cancellation notice for the Specified Amount
increase, whichever is latest. If you decide to cancel the increase in
Specified Amount, you must return the adjusted Contract by mail or other
delivery method to the Home Office or to the authorized Kansas City Life
agent who sold it. Immediately after mailing or delivery, the
increase will be deemed void from the beginning. Within seven calendar
days after Kansas City Life receives the adjusted contract, any charges
attributable to the increase will be returned to your Contract Value.
Premiums
The minimum initial premium payment required depends on a number
of factors, such as the Age, sex and risk class of the proposed
Insured, the Initial Specified Amount, any supplemental and/or
rider benefits and the Planned Periodic Premium payments you
propose to make. See "Planned Periodic Premiums," below.
Consult your Kansas City Life agent for information about the
initial premium required for the coverage you desire.
Additional unscheduled premium payments can be made at any time
while the Contract is in force. Kansas City Life has the right
to limit the number and amount of such premium payments.
In addition, total premiums paid may not exceed premium
limitations for life insurance set forth in the Internal Revenue
Code. Kansas City Life will monitor Contracts and will notify
you if a premium payment exceeds this limit and will cause the
Contract to violate the definition of insurance. You may choose
to take a refund of the portion of the premium payment that is
determined to be in excess of the guideline premium limit or you
may submit an application to modify the Contract so it continues
to qualify as a contract for life insurance. Modifying the
Contract may require evidence of insurability. See "Tax
Considerations," page 47.
Your Contract may become a modified endowment contract if
premiums paid exceed the "7-Pay Test" as set forth in the
Internal Revenue Code. Kansas City Life will monitor Contracts
and will attempt to notify you on a timely basis if, based
on Kansas City Life's interpretation of the relevant tax rules, your
Contract is in jeopardy of becoming a modified endowment
contract. See "Tax Considerations," page 47.
Also, Kansas City Life reserves the right to require
satisfactory evidence of insurability prior to accepting
unscheduled premiums. See "Net Premium Allocations and Crediting," page 19.
Lastly, no premium payment will be accepted after the Maturity
Date.
Premium payments must be made by check payable to Kansas City
Life Insurance Company or by any other method that Kansas City
Life deems acceptable. A loan repayment must be clearly marked
as such or it will be credited as a premium. See "Loan
Repayment; Effect if Not Repaid," page 32.
Planned Periodic Premiums. When applying for a Contract, you
select a plan for paying level premium payments quarterly, semi-annually or
annually. If you elect, Kansas City Life will also arrange for payment of
Planned Periodic Premiums on a monthly or quarterly basis under a pre-authorized
payment arrangement. You are not required to pay premium payments in accordance
with these plans; rather, you can pay more or less than planned or skip a
Planned Periodic Premium entirely. (See, however, "Premium Payments to Prevent
Lapse," page 19, and "Guaranteed Payment Period and Guaranteed Monthly Premium"
below.) Each premium after the initial premium must be at least $25. Kansas
City Life may increase this minimum limit 90 days after we send you a written
notice of such increase. Subject to the limits described above, you can change
the amount and frequency of Planned Periodic Premiums whenever you want by
sending Written Notice to the Home Office. However, Kansas City Life reserves
the right to limit the amount of a premium payment or the total premium payments
paid, as discussed above.
Guaranteed Payment Period and Guaranteed Monthly Premium. A
Guaranteed Payment Period is the period during which Kansas City
Life guarantees that the Contract will not lapse if the amount
of total premiums paid is greater than or equal to the sum of:
(1) the accumulated Guaranteed Monthly Premiums in effect on
each prior Monthly Anniversary Day, and (2) an amount equal to
the sum of any partial surrenders taken and Indebtedness under
the Contract. The Guaranteed Payment Periods are five years
following the Contract Date and five years following the
effective date of an increase in the Specified Amount.
The Guaranteed Monthly Premium is shown in the Contract. The
per $1,000 Guaranteed Monthly Premium factors for the Specified
Amount vary by risk class, issue Age, and sex. Additional
premiums for substandard ratings and supplemental and/or rider
benefits are included in the Guaranteed Monthly Premium.
However, upon a change to the Contract, Kansas City Life will
recalculate the Guaranteed Monthly Premium and will notify you
of the new Guaranteed Monthly Premium and amend your Contract to
reflect the change.
Premium Payments Upon Increase in Specified Amount. A new
Guaranteed Payment Period begins on the effective date of an
increase in Specified Amount. You will be notified of the new
Guaranteed Monthly Premium for this period. Depending on the
Contract Value at the time of an increase in the Specified
Amount and the amount of the increase requested, an additional
premium payment may be necessary or a change in the amount of
Planned Periodic Premiums may be advisable. See "Changes in
Specified Amount," page 30.
Premium Payments to Prevent Lapse
Failure to pay Planned Periodic Premiums will not necessarily cause a
Contract to lapse. Conversely, paying all Planned Periodic Premiums will
not guarantee that a Contract will not lapse. The conditions that
will result in your Contract lapsing will vary, as follows,
depending on whether a Guaranteed Payment Period is in effect.
During the Guaranteed Payment Period. A grace period starts if
on any Monthly Anniversary Day the Cash Surrender Value is less
than the amount of the Monthly Deduction and the accumulated
premiums paid as of the Monthly Anniversary Day are less than
required to guarantee the Contract will not lapse during the
Guaranteed Payment Period. See "Guaranteed Payment Period and
Guaranteed Monthly Premium," page 18.
The premium required to keep the Contract in force will be an
amount equal to the lesser of: (1) the amount to guarantee the
Contract will not lapse during the Guaranteed Payment Period
less the accumulated premiums paid; and (2) an amount sufficient
to provide a Cash Surrender Value equal to three Monthly
Deductions.
After the Guaranteed Payment Period. A grace period starts if
the Cash Surrender Value on a Monthly Anniversary Day will not
cover the Monthly Deduction. A premium sufficient to provide a
Cash Surrender Value equal to three Monthly Deductions must be
paid during the grace period to keep the Contract in force.
Grace Period. The grace period is a 61-day period to make a
premium payment sufficient to prevent lapse. See "Premium
Payments to Prevent Lapse," page 19. Kansas City Life will
send notice of the amount required to be paid during the grace
period to your last known address and the address of any
assignee of record. The grace period will begin when the notice
is sent. Your Contract will remain in force during the grace
period. If the Insured should die during the grace period, the
Death Benefit proceeds will still be payable to the Beneficiary,
although the amount paid will reflect a reduction for the
Monthly Deductions due on or before the date of the Insured's
death (and for any Indebtedness). See "Amount of Death Benefit
Proceeds," page 29. If the grace period premium payment has not
been paid before the grace period ends, your Contract will
lapse. It will have no value and no benefits will be payable.
See "Reinstatement," page 45.
A grace period also may begin if Indebtedness becomes excessive.
See "Loan Repayment; Effect if Not Repaid," page 32.
Premium Allocations and Crediting
In the Contract application, you specify the percentage of a Net
Premium to be allocated to each Subaccount and to the Fixed
Account. The sum of your allocations must equal 100%, and
Kansas City Life reserves the right to limit the number of
Subaccounts to which premiums may be allocated. You can change
the allocation percentages at any time, subject to these rules,
by sending Written Notice to the Home Office. The change will
apply to the premium payments received with or after receipt of
your notice.
On the Allocation Date, the initial Net Premium will be
allocated to the Federated Prime Money Fund II Subaccount. If any additional
premiums are received before the Reallocation Date, the
corresponding Net Premiums also will be allocated to the Federated
Prime Money Fund II Subaccount. The "free-look" period under the
Contract is assumed to end on the Reallocation Date, and on that
date, Contract Value in the Federated Prime Money Fund II Subaccount will be
allocated to the Subaccounts and to the Fixed Account as
requested. See "Determining the Contract Value," page 28.
Premiums received on or after the Reallocation Date will be
credited to the Contract and the Net Premiums will be invested
as requested on the Valuation Day they are received at our Home
Office, except if additional underwriting is required. Premium
payments requiring additional underwriting will not be credited
to the Contract until underwriting has been completed and the
premium payment has been accepted. If the additional premium
payment is rejected, Kansas City Life will return the premium
payment immediately, without any adjustment for investment
experience.
Transfer Privilege
After the Reallocation Date and prior to the Maturity Date, you
may transfer all or part of an amount in the Subaccount(s) to
another Subaccount(s) or to the Fixed Account, or transfer a
part of the amount in the Fixed Account to the Subaccount(s),
subject to the following restrictions. The minimum transfer
amount is the lesser of $250 or the entire amount in that
Subaccount or the Fixed Account. A transfer request that would
reduce the amount in a Subaccount or the Fixed Account below
$250 will be treated as a transfer request for the entire amount
in that Subaccount or the Fixed Account.
We will make the transfer on the date that we receive Written
Notice requesting such transfer. There is no limit on the
number of transfers that can be made between Subaccounts or to
the Fixed Account. However, only one transfer may be made from
the Fixed Account each Contract Year. See "Transfers from Fixed
Account," page 22, for restrictions. The first six transfers
during each Contract Year are free. Any unused free transfers
do not carry over to the next Contract Year. We will assess a
$25 Transfer Processing Fee for the seventh and each subsequent
transfer during a Contract Year. For the purpose of assessing
the fee, each Written Notice (or telephone request described
below) is considered to be one transfer, regardless of the
number of Subaccounts or the Fixed Account affected by the
transfer. The processing fee will be deducted from the amount
being transferred or from the remaining Contract Value,
according to your instructions.
Telephone Transfers. Telephone transfers will be based upon
instructions given by telephone, provided the appropriate
election has been made at the time of application or proper
authorization has been provided to us. We reserve the right to
suspend telephone transfer privileges at any time, for any
reason, if we deem such suspension to be in the best interests
of Contract Owners.
We will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, and if we
follow those procedures we will not be liable for any losses due
to unauthorized or fraudulent instructions. We may be liable
for such losses if we do not follow those reasonable procedures.
The procedures we will follow for telephone transfers include
requiring some form of personal identification prior to acting
on instructions received by telephone, providing written
confirmation of the transaction, and making a tape recording of
the instructions given by telephone.
Special Transfer Right. During the first 24 Contract Months
following the Contract Date and during the first 24 Contract
Months following the effective date of an increase to the
Specified Amount, the Owner may exercise a one-time Special
Transfer Right by requesting that all or a portion of the
Variable Account Value be transferred to the Fixed Account.
Exercise of the Special Transfer Right does not count toward the
six transfers that are permitted each Contract Year without
imposing the Transfer Processing Fee, and is not subject to a
Transfer Processing Fee.
Dollar Cost Averaging Plan
The Dollar Cost Averaging Plan, if elected, enables you to
transfer systematically and automatically, on a monthly basis
for a period of 3 to 36 months, specified dollar amounts from
the Federated Prime Money Fund II Subaccount to other Subaccounts. By
allocating on a regularly scheduled basis, as opposed to
allocating the total amount at one particular time, you may be
less susceptible to the impact of market fluctuations. However,
we make no guarantee that the Dollar Cost Averaging Plan will
result in a gain.
At least $250 must be transferred from the Federated Prime Money
Fund II Subaccount each month. The required amounts may be allocated to
the Federated Prime Money Fund II Subaccount through initial or subsequent
premium payments or by transferring amounts into the Federated Prime
Money Fund II Subaccount from the other Subaccounts or from the Fixed
Account (which may be subject to certain restrictions).
You may elect this plan at the time of application by completing
the authorization on the application or at any time after the
Contract is issued by properly completing the election form and
returning it to us. The election form allows you to specify the
number of months for the Dollar Cost Averaging Plan to be in
effect. Dollar cost averaging transfers will commence on the
next Monthly Anniversary Day on or next following the
Reallocation Date. Dollar cost averaging will terminate at the
completion of the designated number of months or when the value of the Federated
Prime Money Fund II Subaccount is completely depleted, or the day we
receive Written Notice instructing us to cancel the Dollar Cost
Averaging Plan.
Transfers made from the Federated Prime Money Subaccount for
the Dollar Cost Averaging Plan will not count toward the six
transfers permitted each Contract Year without imposing the
Transfer Processing Fee.
Portfolio Rebalancing Plan
You may elect to have the accumulated balance of each Subaccount
redistributed to equal a specified percentage of the Variable
Account Value. This will be done on a quarterly basis at
three-month intervals from the Monthly Anniversary Day on which
the Portfolio Rebalancing Plan commences. If elected, this plan
automatically adjusts your Portfolio mix to be consistent with
the allocation most recently requested. The redistribution will
not count toward the six transfers permitted each Contract Year
without imposing the Transfer Processing Fee. If the Dollar
Cost Averaging Plan has been elected and has not been completed,
the Portfolio Rebalancing Plan will commence on the Monthly
Anniversary Day following the termination of the Dollar Cost
Averaging Plan.
You may elect this plan at the time of application by completing the
authorization on the application or at any time after the Contract is issued
by properly completing the election form and returning it to us. Portfolio
rebalancing will terminate when you request any transfer or the day we
receive Written Notice instructing us to cancel the Portfolio Rebalancing Plan.
FIXED ACCOUNT
Because of exemptive and exclusionary provisions, interests in
the Fixed Account have not been registered under the Securities
Act of 1933 nor has the Fixed Account been registered as an
investment company under the Investment Company Act of 1940.
Accordingly, neither the Fixed Account nor any interests therein
are subject to the provisions of these Acts and, as a result,
the staff of the Securities and Exchange Commission has not
reviewed the disclosure in this Prospectus relating to the Fixed
Account. The disclosure regarding the Fixed Account may,
however, be subject to certain generally applicable provisions
of the Federal securities laws relating to the accuracy and
completeness of statements made in prospectuses.
You may allocate some or all of the Net Premiums and transfer
some or all of the Variable Account Value to the Fixed Account,
which is part of our General Account and pays interest at
declared rates guaranteed for each calendar year (subject to a
minimum interest rate we guarantee to be 4%). Our General
Account supports our insurance and annuity obligations.
The portion of the Contract Value allocated to the Fixed Account
will be credited with rates of interest, as described below.
Since the Fixed Account is part of our General Account, we
assume the risk of investment gain or loss on this amount. All
assets in the General Account are subject to our general
liabilities from business operations.
Minimum Guaranteed and Current Interest Rates
Fixed Account Value is guaranteed to accumulate at a minimum
effective annual interest rate of 4%. We intend to credit Fixed
Account Value with current rates in excess of the minimum
guarantee but we are not obligated to do so. These current
interest rates are influenced by, but do not necessarily
correspond to, prevailing general market interest rates. Since
we, in our sole discretion, anticipate changing the current
interest rate from time to time, different allocations to and
from the Fixed Account Value will be credited with different
interest rates, based upon the date amounts are allocated into
the Fixed Account. While we may change the interest rate
credited to allocations from Net Premiums at any time, the
interest rate credited to amounts allocated to the Fixed Account
and accrued interest thereon will not change more often than
once per year. Any interest credited on the amounts in the
Fixed Account in excess of the minimum guaranteed rate of 4% per
year will be determined in our sole discretion. You assume the
risk that interest credited may not exceed the guaranteed rate.
Amounts deducted from the Fixed Account for the Monthly
Deduction, surrenders, transfers to the Subaccounts, or charges
are currently, for the purpose of crediting interest, accounted
for on a last-in, first-out ("LIFO") method. We reserve the
right to change the method of crediting from time to time,
provided that such changes do not have the effect of reducing
the guaranteed rate of interest below 4% per annum or shorten
the period for which the interest rate applies to less than a
year (except for the year in which such amount is received or
transferred).
Calculation of Fixed Account Value
Fixed Account Value at any time is equal to amounts allocated or
transferred to it, plus interest credited to it, minus amounts
deducted, transferred, or surrendered from it.
Transfers from Fixed Account
One transfer each Contract Year is allowed from the Fixed
Account to any or all of the Subaccounts. The amount
transferred from the Fixed Account may not exceed 25% of the
unloaned Fixed Account Value on the date of transfer, unless the
balance after the transfer is less than $250, in which case we
will transfer the entire amount.
Payment Deferral
We reserve the right to defer payment of any surrender, partial
surrender, or transfer from the Fixed Account for up to six
months from the date of receipt of the Written Notice for the
partial or full surrender or transfer.
CHARGES AND DEDUCTIONS
Premium Expense Charge
A 2.25% charge for state and local premium taxes and
administrative expenses is deducted from each premium payment.
The state and local premium tax charge reimburses Kansas City
Life for premium taxes and related administrative expenses
associated with the Contracts. Kansas City Life expects to pay
an average state and local premium tax rate (including related
administrative expenses) of approximately 2.25% of premium
payments for all states.
Monthly Deduction
On the Allocation Date, Kansas City Life will deduct Monthly
Deductions for the Contract Date and each Monthly Anniversary
that have occurred prior to the Allocation Date. See "Applying
for Contract," page 16. Subsequent Monthly Deductions will be
made as of each Monthly Anniversary Day thereafter. Your
Contract Date is the date used to determine your Monthly
Anniversary Day. The Monthly Deduction consists of (1) cost of
insurance charges, (2) administration fees (the "Monthly Expense
Charge"), and (3) any charges for supplemental and/or rider
benefits, as described below. The Monthly Deduction is deducted
from the Variable Accounts and Fixed Account pro rata on the
basis of the portion of Contract Value in each account on the
Monthly Anniversary Day.
Cost of Insurance Charge. This charge compensates Kansas City
Life for the expense of providing insurance coverage. The
charge depends on a number of variables and therefore will vary
from Contract to Contract and from Monthly Anniversary Day to
Monthly Anniversary Day. For any Contract, the cost of
insurance on a Monthly Anniversary Day is calculated by
multiplying the current cost of insurance rate for the Insured
by the net amount at risk for that Monthly Anniversary Day.
The net amount at risk on a Monthly Anniversary Day is the
difference between the Death Benefit (see "Coverage Options,"
page 29), discounted with one month of interest and the
Contract Value, as calculated on that Monthly Anniversary Day
before the cost of insurance charge is taken. The interest rate
used to discount the Death Benefit is the monthly
equivalent of 4% per year.
The cost of insurance rate for a Contract on a Monthly
Anniversary Day is based on the Insured's Age, sex, number of
completed Contract Years, and risk class, and therefore varies
from time to time. Kansas City Life currently places Insureds
in the following classes, based on underwriting: Standard
Smoker, Standard Nonsmoker, or Preferred Nonsmoker. An Insured
may be placed in a substandard risk class, which involves a
higher mortality risk than the Standard Smoker or Standard
Nonsmoker classes. Standard Nonsmoker rates are available for
Issue Ages 0-80. Standard Smoker and Preferred Nonsmoker rates
are available for Issue Ages 15-80.
The cost of insurance rate for an increase in Specified Amount
will be determined on each Monthly Anniversary Day and is based
on the Insured's Age, sex, number of completed Contract Years,
and risk class.
Kansas City Life places the Insured in a risk class when the
Contract is given underwriting approval, based on Kansas City
Life's underwriting of the application. When an increase in
Specified Amount is requested, Kansas City Life conducts
underwriting before approving the increase (except as noted
below) to determine the risk class that will apply to the
increase. If the risk class for the increase has lower cost of
insurance rates than the existing risk class, the lower rates
will apply to the entire Specified Amount. If the risk class
for the increase has higher cost of insurance rates than the
existing class, the higher rates will apply only to the increase
in Specified Amount, and the existing risk class will continue
to apply to the existing Specified Amount.
Kansas City Life does not conduct underwriting for an increase
in Specified Amount if the increase is requested as part of a
conversion from a term contract or on exercise of the Option to
Increase Specified Amount Rider. See "Supplemental and/or
Rider Benefits," page 45. In the case of a term conversion,
the risk class that applies to the increase will be based on the
provisions of the term contract. In the case of an increase
under the Option to Increase Specified Amount Rider, the
Insured's risk class for an increase will be the class in effect
on the initial Specified Amount at the time that the increase is
elected.
The net amount at risk associated with a Specified Amount
increase is determined by the percentage that the Specified
Amount increase bears to the Contract's total Specified Amount
immediately following the increase. The resulting percentage is
the part of the Contract's total net amount at risk that is
attributed to the Specified Amount increase. The remaining
percentage of the Contract's total net amount at risk is
attributed to the existing Specified Amount. (For example, if
the Contract's Specified Amount is increased by $100,000 and the
total Specified Amount is $250,000, then 40% of the total net
amount at risk is attributed to the Specified Amount increase.)
On each Monthly Anniversary Day, the net amount at risk used to
determine the cost of insurance charge associated with the
Specified Amount increase is the Contract's total net amount of
risk at that time, multiplied by the percentage calculated as
described above. This percentage remains fixed until the
Specified Amount is changed.
Kansas City Life guarantees that the cost of insurance rates
used to calculate the monthly cost of insurance charge will not
exceed the maximum cost of insurance rates set forth in the
Contracts. The guaranteed rates for standard and preferred
classes are based on the 1980 Commissioners' Standard Ordinary
Mortality Tables, Male or Female, Smoker or Nonsmoker Mortality
Rates ("1980 CSO Tables"). The guaranteed rates for substandard
classes are based on multiples of or additives to the 1980 CSO
Tables.
Kansas City Life's current cost of insurance rates may be less
than the guaranteed rates that are set forth in the Contract.
Current cost of insurance rates will be determined based on
Kansas City Life's expectations as to future mortality
experience. These rates may change from time to time.
Cost of insurance rates (whether guaranteed or current) for an
Insured in a nonsmoker standard class are lower than rates for
an Insured of the same age and sex in a smoker standard class.
Cost of insurance rates (whether guaranteed or current) for an
Insured in a nonsmoker or smoker standard class are lower than
guaranteed rates for an Insured of the same age, sex and smoking
class in a substandard class.
Legal Considerations Relating to Sex-Distinct Premium Payments
and Benefits. Cost of insurance rates for Contracts generally
distinguish between males and females. Thus, premium payments
and benefits under Contracts covering males and females of the
same age will generally differ.
Kansas City Life does, however, also offer Contracts that do not
distinguish between males and females if required by state law.
Employers and employee organizations considering purchase of a
Contract should consult with their legal advisors to determine
whether purchase of a Contract based on sex-distinct cost of
insurance rates is consistent with Title VII of the Civil Rights
Act of 1964 or other applicable law. Kansas City Life will
offer to such prospective purchasers Contracts with cost of
insurance rates that do not distinguish between males and
females.
Monthly Expense Charge
Kansas City Life will begin deducting the Monthly Expense Charge
from the Contract Value as of the Contract Date. See "Applying
for a Contract," page 16. Thereafter, Kansas City Life will
deduct a Monthly Expense Charge from the Contract Value as of
each Monthly Anniversary Day. The Monthly Expense Charge is
made up of two parts:
(1) a maintenance charge which is a level monthly charge which applies in
all years. The maintenance charge is guaranteed not to exceed $6.00.
(2) an acquisition charge which is a charge of $20 per Contract Month for
the first Contract Year and $20 per Contract Month for 12 months following the
effective date of an increase in Specified Amount.
The Monthly Expense Charge reimburses Kansas City Life for expenses incurred in
the administration of the Contracts and the Variable Account. Such expenses
include but are not limited to:
underwriting and issuing the Contract, confirmations, annual
reports and account statements, maintenance of Contract records,
maintenance of Variable Account records, administrative
personnel costs, mailing costs, data processing costs, legal
fees, accounting fees, filing fees, the costs of other services
necessary for Contract Owner servicing and all accounting,
valuation, regulatory and updating requirements.
Kansas City Life does not expect to profit from these charges.
Should the guaranteed charges prove to be insufficient, the
Company will not increase the charges above such guaranteed
levels and will incur the loss.
Supplemental and/or Rider Benefit Charges. See "Supplemental
and/or Rider Benefits," page 45.
Daily Mortality and Expense Risk Charge
Kansas City Life deducts a daily charge from assets in the
Subaccounts attributable to the Contracts. This charge does not
apply to Fixed Account assets attributable to the Contracts.
The current charge is at an annual rate of 0.90% of net assets,
and is guaranteed not to increase for the duration of a
Contract. Kansas City Life may realize a profit from this
charge.
The mortality risk Kansas City Life assumes is that the Insureds
under the Contracts may die sooner than anticipated and therefore
Kansas City Life will pay an aggregate amount of death benefits
greater than anticipated. The expense risk Kansas City Life
assumes is that expenses incurred in issuing and administering
the Contracts and the Variable Account will exceed the amounts
realized from the administrative charges assessed against the
Contracts.
Transfer Processing Fee
The first six transfers during each Contract Year are free. We
will assess a $25 Transfer Processing Fee for each additional
transfer during such Contract Year. For the purpose of
assessing the fee, we will consider each written or telephone
request seeking a transfer to be one transfer, regardless of the
number of accounts affected by the transfer. We will deduct the
Transfer Processing Fee from the amount being transferred or
from the remaining Contract Value, according to your
instructions. We do not expect a profit from this fee.
Surrender Charge
During the first fifteen Contact Years, a Surrender Charge will
be deducted from the Contract Value if the Contract is
completely surrendered or lapses or the Specified Amount is
reduced (including when a partial surrender reduces the
Specified Amount). The Surrender Charge is the sum of two
parts, the Deferred Sales Load and the Deferred Administrative
Expense. The total Surrender Charge will not exceed the maximum
Surrender Charge set forth in your Contract. An additional
Surrender Charge and Surrender Charge period will apply to each
portion of the Contract resulting from a Specified Amount
increase, starting with the effective date of the increase.
Any Surrender Charge deducted upon lapse is credited back to the
Contract Value upon reinstatement. The Surrender Charge on the
date of reinstatement will be the same as it was on the date of
lapse. For purposes of determining the Surrender Charge on any
date after reinstatement, the period the Contract was lapsed
will not count.
Deferred Sales Load. The Deferred Sales Load is 30% of actual
premiums paid up to a maximum premium amount shown in the
Contract. The maximum premium amount shown in the Contract is
based on the issue Age, sex, Specified Amount, and smoking class
applicable to the Insured. If you increase the Contract's
Specified Amount, a separate Deferred Sales Load will apply to
the Specified Amount increase, based on the Insured's Age, sex,
and smoking class at the time of the increase.
The Deferred Sales Load in the first nine years of the Surrender
Charge period is 30% of actual premiums paid up to the maximum
premium amount shown in the Contract. After the ninth year of
the Surrender Charge Period, the Deferred Sales Load declines
until it reaches 0% in the fifteenth year of the Surrender
Charge period.
Notwithstanding the sales load applicable during a Surrender
Charge period, the Deferred Sales Load that applies during the
first two years of a Surrender Charge period may not exceed 30%
of premiums paid up to the first "SEC guideline annual premium,"
10% of premiums paid in excess of the first guideline annual
premium and up to the second SEC guideline annual premium, and
9% of premium payments made in excess of two guideline annual
premiums. An "SEC guideline annual premium" is a hypothetical
level amount that would be payable through the Maturity Date for
the benefits provided under the Contract, assuming cost of
insurance rates based on the 1980 Commissioners Standard
Ordinary Mortality Tables, net investment earnings under the
Contract at an effective annual rate of 5%, and sales and other
charges imposed under the Contract.
The purpose of the Deferred Sales Load is to reimburse Kansas
City Life for some of the expenses incurred in the distribution
of the Contracts. It may be insufficient to recover
distribution expenses related to the sale of the Contracts.
Unrecovered expenses are borne by Kansas City Life's general
assets, which may include profits, if any, from the Mortality
and Expense Risk Charge and mortality gains from cost of
insurance charges. See "Daily Mortality and Expense Risk
Charge," page 25, and "Cost of Insurance Charge," page 23.
Deferred Administrative Expense. The Table below shows the
Deferred Administrative Expense deducted if the Contract is
completely surrendered or lapses or if the Specified Amount
is reduced (including when a partial surrender reduces the
Specified Amount) during the first fifteen Contract
Years or during the fifteen years following an increase in
Specified Amount. The Deferred Administrative Expense is
an amount per $1,000 of Specified Amount and will grade
down to zero at the end of fifteen years.
Table of Deferred Administrative Expenses per $1,000 of
Specified Amount
End of Year* Deferred Administrative Expense
1-5 $5.00
6 4.50
7 4.00
8 3.50
9 3.00
10 2.50
11 2.00
12 1.50
13 1.00
14 0.50
15 0.00
* End of year means number of completed Contract Years or
number of completed years following an increase in Specified
Amount.
After the fifth year, the Deferred Administrative Expense
between years will be pro-rated monthly. The charge for the
first five years will be level.
The Deferred Administrative Expense partially covers the
administrative costs of underwriting and issuing the Contracts,
processing surrenders, lapses, and reductions in Specified
Amount, as well as legal, actuarial, systems, mailing, and other
overhead costs connected with Kansas City Life's variable life
insurance operations. This charge has been designed to cover
actual costs and is not intended to produce a profit.
Partial Surrender Fee
Kansas City Life will deduct an administrative charge upon a
partial surrender. This charge is the lesser of 2% of the
amount surrendered or $25. This charge will be deducted from
the Contract Value in addition to the amount requested to be
surrendered and will be considered to be part of the partial
surrender amount. Kansas City Life does not anticipate making a
profit on this charge.
Fund Expenses
The value of the net assets of each Subaccount reflects the
investment advisory fees and other expenses incurred by the
corresponding Portfolio in which the Subaccount invests. See
the prospectuses for the Funds or Portfolios.
Cost of Additional Benefits Provided by Riders
The cost of additional benefits provided by riders is part of
the Monthly Deduction and is charged to the Contract Value on
the Monthly Anniversary Day.
Bonus on Contract Value in the Variable Account
A bonus may be credited to the Contract on each Monthly
Anniversary Day beginning in the eleventh Contract Year. The
monthly bonus equals 0.0375% (0.45% on an annualized basis) of
the Contract Value in each Subaccount of the Variable Account at
the end of each Contract Month. The bonus is not guaranteed,
and will be paid in Kansas City Life's sole discretion.
Other Tax Charge
Kansas City Life does not currently assess a charge for any
taxes other than state premium taxes incurred as a result of the
operations of the Subaccounts of the Variable Account. We
reserve the right, however, to assess a charge for such taxes
against the Subaccounts if we determine that such taxes will be
incurred.
HOW YOUR CONTRACT VALUES VARY
There is no minimum guaranteed Contract Value or Cash Surrender
Value. These values will vary with the investment experience of
the Subaccounts and/or the crediting of interest in the Fixed
Account, and will depend on the allocation of Contract Value.
If the Cash Surrender Value on a Monthly Anniversary Day is less
than the amount of the Monthly Deduction to be deducted on that
date (see "Premium Payments To Prevent Lapse," page 19) and the
Guaranteed Payment Period is not
then in effect, the Contract will be in default and a grace
period will begin. See "Guaranteed Payment Period and
Guaranteed Monthly Premium," page 18, and "Grace Period," page
19.
Determining the Contract Value
On the Allocation Date, the Contract Value is equal to the
initial Net Premium less the Monthly Deductions deducted from
the Contract Date. On each Valuation Day thereafter, the
Contract Value is the aggregate of the Subaccount Values and the
Fixed Account Value (including the Loan Account Value). The
Contract Value will vary to reflect the performance of the
Subaccounts to which amounts have been allocated, interest
credited on amounts allocated to the Fixed Account, interest
credited on amounts in the Loan Account, charges, transfers,
partial surrenders, loans and loan repayments.
Subaccount Values. When you allocate an amount to a Subaccount,
either by Net Premium payment allocation or transfer, your
Contract is credited with accumulation units in that Subaccount.
The number of accumulation units is determined by dividing the
amount allocated to the Subaccount by the Subaccount's
accumulation unit value for the Valuation Day when the
allocation is effected.
The number of Subaccount accumulation units credited to your
Contract will increase when Net Premium payments are allocated
to the Subaccount and when amounts are transferred to the
Subaccount. The number of Subaccount accumulation units
credited to a Contract will decrease when the allocated portion
of the Monthly Deduction is taken from the Subaccount, a loan is
made, an amount is transferred from the Subaccount, or a partial
surrender, including the Partial Surrender Fee, is taken from
the Subaccount.
Accumulation Unit Values. A Subaccount's accumulation unit
value varies to reflect the investment experience of the
underlying Portfolio, and may increase or decrease from one
Valuation Day to the next. The accumulation unit value for each
Subaccount was arbitrarily set at $10 when the Subaccount was
established. For each Valuation Period after the date of
establishment, the accumulation unit value is determined by
multiplying the value of an accumulation unit for a Subaccount
for the prior valuation period by the net investment factor for
the Subaccount for the current valuation period.
Net Investment Factor. The net investment factor is an index
used to measure the investment performance of a Subaccount from
one Valuation Day to the next. It is based on the change in net
asset value of the Fund shares held by the Subaccount, and
reflects any gains or losses in the Subaccounts, dividends paid,
any capital gains or losses, any taxes, and the daily mortality
and expense risk charge.
Fixed Account Value. On any Valuation Day, the Fixed Account
Value of a Contract is the total of all Net Premium payments
allocated to the Fixed Account, plus any amounts transferred to
the Fixed Account (including amounts transferred in connection
with Contract loans), plus interest credited on such Net Premium
payments and amounts, less the amount of any transfers from the
Fixed Account, less the amount of any partial surrenders,
including the Partial Surrender Fee, taken from the Fixed
Account, and less the pro-rata portion of the Monthly Deduction
deducted from the Fixed Account.
Loan Account Value. On any Valuation Day, if there have been
any Contract loans, the Loan Account Value is equal to amounts
transferred to the Loan Account from the Subaccounts and from
the unloaned value in the Fixed Account as collateral for
Contract loans and for due and unpaid loan interest, less
amounts transferred from the Loan Account to the Subaccounts and
the unloaned value in the Fixed Account as Indebtedness is
repaid, and plus interest credited.
Cash Surrender Value
The Cash Surrender Value on a Valuation Day is the Contract
Value reduced by any applicable Surrender Charges and any
Indebtedness. Cash Surrender Value is used to determine whether
a partial surrender may be taken, whether Contract loans may be
taken, and whether a grace period starts. See "Premium Payments
to Prevent Lapse," page 19. It is also the amount that is
available upon full surrender of the Contract. See
"Surrendering the Contract for Cash Surrender Value," page 33.
DEATH BENEFIT AND CHANGES IN SPECIFIED AMOUNT
As long as the Contract remains in force, Kansas City Life will
pay the Death Benefit proceeds upon receipt at the Home Office
of proof of the Insured's death that Kansas City Life deems
satisfactory. Kansas City Life may require return of the
Contract. The Death Benefit proceeds will be paid in a lump sum
generally within seven calendar days of receipt of satisfactory
proof (see "When Proceeds Are Paid," page 44) or, if elected,
under a payment option (see "Payment Options," page 33). The
Death Benefit proceeds will be paid to the Beneficiary. See "Selecting
and Changing the Beneficiary," page 31.
Amount of Death Benefit Proceeds
The Death Benefit proceeds are equal to the sum of the Death
Benefit under the Coverage Option selected calculated on the
date of the Insured's death, plus any supplemental and/or rider
benefits, minus any Indebtedness on that date and, if the date
of death occurred during a grace period, minus any past due
Monthly Deductions. Under certain circumstances, the amount of
the Death Benefit may be further adjusted. See "Limits on
Rights to Contest the Contract" and "Misstatement of Age or
Sex," page 44.
If part or all of the Death Benefit is paid in one sum, Kansas
City Life will pay interest on this sum as required by
applicable state law from the date of receipt of due proof of
the Insured's death to the date of payment.
Coverage Options
The Contract Owner may choose one of two Coverage Options, which
will be used to determine the Death Benefit. Under Option A,
the Death Benefit is the greater of the Specified Amount or the
Applicable Percentage (as described below) of Contract Value on
the date of the Insured's death. Under Option B, the Death
Benefit is the greater of the Specified Amount plus the Contract
Value on the date of death, or the Applicable Percentage of the
Contract Value on the date of the Insured's death.
If investment performance is favorable, the amount of the Death
Benefit may increase. However, under Option A, the Death
Benefit ordinarily will not change for several years to reflect
any favorable investment performance and may not change at all.
Under Option B, the Death Benefit will vary directly with the
investment performance of the Contract Value. To see how and
when investment performance may begin to affect the Death
Benefit, see the illustrations beginning on page 34.
The "Applicable Percentage" is 250% when the Insured has
attained Age 40 or less, and decreases each year thereafter to
100% when the Insured has attained Age 95.
Initial Specified Amount and Coverage Option
The Initial Specified Amount is set at the time the Contract is
issued. You may change the Specified Amount from time to time,
as discussed below. You select the Coverage Option when you
apply for the Contract. You also may change the Coverage
Option, as discussed below.
Changes in Coverage Option
On or after the first Contract Anniversary, you may change the
Coverage Option on your Contract subject to the following rules.
After the Coverage Option has been changed, it cannot be
changed again for the next twelve Contract Months. After any
change, the Specified Amount must be at least $100,000 for issue
Ages 0-49 and $50,000 for issue Ages 50-80. The effective date
of the change will be the Monthly Anniversary Day that coincides
with or next follows the day that Kansas City Life receives and
accepts the request. Kansas City Life may require satisfactory
evidence of insurability.
When a change from Option A to Option B is made, the Specified
Amount after the change is effective will be equal to the
Specified Amount before the change. The Death Benefit will
increase by the Contract Value on the effective date of the
change. When a change from Option B to Option A is made, the
Specified Amount after the change will be equal to the Specified
Amount before the change is effected plus the Contract Value on
the effective date of the change.
Changes in Specified Amount
On or after the first Contract Anniversary, you may request a
change in the Specified Amount. Once the Specified Amount has
been changed, it cannot be changed again for the next twelve
Contract Months. If a change in the Specified Amount would
result in total premiums paid exceeding the premium limitations
prescribed under current tax law to qualify your Contract as a
life insurance contract, Kansas City Life will refund, after the
next Monthly Anniversary, to the Owner the amount of such excess
above the premium limitations.
Kansas City Life reserves the right to decline a requested
decrease in the Specified Amount if compliance with the
guideline premium limitations under current tax law resulting
from this decrease would result in immediate termination of the
Contract, or if to effect the requested decrease, payments to
the Owner would have to be made from the Contract Value for
compliance with the guideline premium limitations, and the
amount of such payments would exceed the Cash Surrender Value
under the Contract.
The Specified Amount after any decrease must be at least
$100,000 for Contracts that were issued at issue Ages 0-49 and
$50,000 for Contracts that were issued at issue Ages 50-80. A
decrease in Specified Amount will become effective on the
Monthly Anniversary Day that coincides with or next follows
receipt and acceptance of a request at the Home Office.
Decreasing the Specified Amount of the Contract may have the
effect of decreasing monthly Cost of Insurance Charges.
However, if the Specified Amount is decreased, a Surrender
Charge will apply. See "Surrender Charge," page 25.
Any increase in the Specified Amount must be at least $25,000
and an application must be submitted. Kansas City Life reserves
the right to require satisfactory evidence of insurability. In
addition, the Insured's attained Age must be less than the
current maximum issue Age for the Contracts, as determined by
Kansas City Life from time to time. A change in Planned
Periodic Premiums may be advisable. See "Premium Payments Upon
Increase in Specified Amount," page 19.
The increase in Specified Amount will become effective on the
Monthly Anniversary Day on or next following the date the
request for the increase is received and approved. A new
Guaranteed Payment Period will begin on the effective date of
the increase and will continue for five years. The Contract's
Guaranteed Monthly Premium will be recalculated to reflect the
increase. If a Guaranteed Payment Period is in effect, the
Contract's Guaranteed Monthly Premium amount will also generally
be increased. See "Guaranteed Payment Period and Guaranteed
Monthly Premium," page 18 and "Premium Payments Upon Increase
in Specified Amount," page 19.
An increase in Specified Amount may be cancelled by the Owner in
accordance with the Contract's "free look" provisions. In such
case, the amount refunded will be limited to those charges that
are attributable to the increase. See "Free Look Right to
Cancel Contract," page 17.
A new Surrender Charge and Surrender Charge period will apply to
each portion of the Contract resulting from an increase in
Specified Amount, starting with the effective date of the
increase. (See "Surrender Charge," page 25). After an
increase, Kansas City Life will, for purposes of calculating
Surrender Charges, attribute a portion of each premium payment
you make to the Specified Amount increase, even if you do not
increase the amount or frequency of your premiums. Net premiums
are allocated based upon the proportion that the SEC guideline
annual premium for the Initial Specified Amount and each increase
bears to the total SEC guideline annual premium for the Contract.
For purposes of calculating Surrender Charges and cost of
insurance charges, any Specified Amount decrease will be used to
reduce any previous Specified Amount increase then in effect,
starting with the latest increase and continuing in the reverse
order in which the increases were made. If any portion of the
decrease is left after all Specified Amount increases have been
reduced, it will be used to reduce the Initial Specified Amount.
Selecting and Changing the Beneficiary
You select the Beneficiary in your application. You may later
change the Beneficiary in accordance with the terms of the
Contract. The Primary Beneficiary, or, if the Primary
Beneficiary is not living, the Contingent Beneficiary, is the
person entitled to receive the Death Benefit proceeds under the
Contract. If the Insured dies and there is no surviving
Beneficiary, the Owner will be the Beneficiary. If a
Beneficiary is designated as irrevocable, then the Beneficiary's
consent must be obtained to change the Beneficiary.
CASH BENEFITS
Contract Loans
Prior to the death of the Insured, you may borrow against your
Contract at any time by submitting a written request to the Home
Office, provided that the Cash Surrender Value of the Contract
is greater than zero. The maximum loan amount is equal to the
Contract's Cash Surrender Value on the effective date of the
loan less loan interest to the next Contract Anniversary.
Outstanding loans reduce the amount available for new loans.
Contract loans will be processed as of the date your written
request is received and approved. Loan proceeds generally will
be sent to you within seven calendar days. See "When Proceeds
Are Paid," page 44.
Interest. Kansas City Life will charge interest on any
Indebtedness at an annual rate of 6.0%. Interest is due and
payable at the end of each Contract Year while a loan is
outstanding. If interest is not paid when due, the amount of
the interest is added to the loan and becomes part of the
Indebtedness.
Loan Collateral. When a Contract loan is made, an amount
sufficient to secure the loan is transferred out of the
Subaccounts and the unloaned value in the Fixed Account and into
the Contract's Loan Account. Thus, a loan will have no
immediate effect on the Contract Value, but the Cash Surrender
Value will be reduced immediately by the amount transferred to
the Loan Account. The Owner can specify the Variable Accounts
and/or Fixed Account from which collateral will be transferred.
If no allocation is specified, collateral will be transferred
from each Subaccount and from the unloaned value in the Fixed
Account in the same proportion that the Contract Value in each
Subaccount and the unloaned value in the Fixed Account bears to
the total Contract Value in those accounts on the date that the
loan is made. An amount of Cash Surrender Value equal to any
due and unpaid loan interest will also be transferred to the
Loan Account on each Contract Anniversary. Due and unpaid
interest will be transferred from each Subaccount and the
unloaned value in the Fixed Account in the same proportion that
each Subaccount Value and the unloaned value in the Fixed
Account Value bears to the total unloaned Contract Value.
The Loan Account will be credited with interest at an effective
annual rate of not less than 4%. Thus, the maximum net cost of
a loan is 2.0% per year (the net cost of a loan is the
difference between the rate of interest charged on Indebtedness
and the amount credited to the Loan Account). On each Monthly
Anniversary, the interest earned on the Loan Account since the
previous Monthly Anniversary will be transferred to the unloaned
value in the Fixed Account.
Preferred Loan Provision. Beginning in the eleventh Contract
Year, a preferred loan may be made. The maximum amount
available for a preferred loan is the Contract Value less
premiums paid and may not exceed the maximum loan amount. The
amount in the Loan Account securing the preferred loan will be
credited with interest at an effective annual rate of 6.0%.
Thus, the net cost of the preferred loan is 0.0% per year. The
preferred loan provision is not guaranteed.
Loan Repayment; Effect if Not Repaid. You may repay all or part
of your Indebtedness at any time while the Insured is living and
the Contract is in force. Each loan repayment must be at least
$50.00. Loan repayments must be sent to the Home Office and
will be credited as of the date received. A loan repayment must
be clearly marked as "loan repayment" or it will be credited as
a premium. (Loan repayments, unlike unscheduled premium
payments, are not subject to Premium Expense Charges.) When a
loan repayment is made, Contract Value in the Loan Account in an
amount equal to the repayment is transferred from the Loan
Account to the Subaccounts and the unloaned value in the Fixed
Account. Thus, a loan repayment will have no immediate effect
on the Contract Value, but the Cash Surrender Value will be
increased immediately by the amount transferred from the Loan
Account. Unless specified otherwise by the Owner, loan
repayment amounts will be transferred to the Subaccounts and the
unloaned value in the Fixed Account according to the premium
allocation instructions in effect at that time.
If the Death Benefit becomes payable while a loan is
outstanding, the Indebtedness will be deducted in calculating
the Death Benefit proceeds. See "Amount of Death Benefit
Proceeds," page 29.
If the Loan Account Value exceeds the Contract Value less any
applicable Surrender Charge on any Valuation Day, the Contract
will be in default. You, and any assignee of record, will be
sent notice of the default. You will have a 61-day grace period
to submit a sufficient payment to avoid termination of coverage
under the Contract. The notice will specify the amount that
must be repaid to prevent termination. See "Premium Payments to
Prevent Lapse," page 19.
Effect of Contract Loan. A loan, whether or not repaid, will
have a permanent effect on the Death Benefit and Contract values
because the investment results of the Subaccounts of the
Variable Account and current interest rates credited on Contract
Value in the Fixed Account will apply only to the non-loaned
portion of the Contract Value. The longer the loan is
outstanding, the greater the effect is likely to be. Depending
on the investment results of the Subaccounts or credited
interest rates for the unloaned value in the Fixed Account while
the loan is outstanding, the effect could be favorable or
unfavorable. Contract loans may increase the potential for
lapse if investment results of the Subaccounts are less than
anticipated. Also, loans could, particularly if not repaid,
make it more likely than otherwise for a Contract to terminate.
See "Tax Considerations," page 47, for a discussion of the tax
treatment of policy loans, and the adverse tax consequences if a
Contract lapses with loans outstanding. In particular, if your
Contract is a "modified endowment contract," loans may be
currently taxable and subject to a 10% penalty tax.
Surrendering the Contract for Cash Surrender Value
You may surrender your Contract at any time for its Cash
Surrender Value by submitting a written request to the Home
Office. Kansas City Life may require return of the Contract. A
Surrender Charge may apply. See "Surrender Charge," page 25. A
surrender request will be processed as of the date your written
request and all required documents are received. Payment will
generally be made within seven calendar days. See "When
Proceeds are Paid," page 44. The Cash Surrender Value may be
taken in one lump sum or it may be applied to a payment option.
See "Payment Options," page 33. Your Contract will terminate
and cease to be in force if it is surrendered for one lump sum.
It cannot later be reinstated. Surrenders may have adverse tax
consequences. See "Tax Considerations," page 47.
Partial Surrenders
You may make partial surrenders under your Contract at any time
subject to the conditions below. You must submit a written
request to the Home Office. Each partial surrender must be at
least $500. The partial surrender amount may not exceed the
Cash Surrender Value, less $300. A Partial Surrender Fee will
be assessed on a partial surrender. See "Partial Surrender
Fee," page 27. This charge will be deducted from your Contract
Value along with the amount requested to be surrendered and will
be considered part of the surrender (together, "partial
surrender amount"). As of the date Kansas City Life receives a
written request for a partial surrender, the Contract Value will
be reduced by the partial surrender amount.
When you request a partial surrender, you can direct how the
partial surrender amount will be deducted from your Contract
Value in the Subaccounts and Fixed Account. If you provide no
directions, the partial surrender amount will be deducted from
your Contract Value in the Subaccounts and Fixed Account on a
pro-rata basis. See "Minimum Guaranteed and Current Interest
Rates," page 21. Partial surrenders may have adverse tax
consequences. See "Tax Considerations," page 47.
If Coverage Option A is in effect, Kansas City Life will reduce
the Specified Amount by an amount equal to the partial surrender
amount, less the excess, if any, of the Death Benefit over the
Specified Amount at the time the partial surrender is made. If
the partial surrender amount is less than the excess of the
Death Benefit over the Specified Amount, the Specified Amount
will not be reduced. Kansas City Life reserves the right to
reject a partial surrender request if the partial surrender
would reduce the Specified Amount below the minimum amount for
which the Contract would be issued under Kansas City Life's
then-current rules, or if the partial surrender would cause the
Contract to fail to qualify as a life insurance contract under
applicable tax laws, as interpreted by Kansas City Life. If a
partial surrender does result in a reduction of the Specified
Amount, a Surrender Charge will apply as described in "Changes
in Specified Amount," page 30.
Partial surrender requests will be processed as of the date your
written request is received, and generally will be paid within
seven calendar days. See "When Proceeds Are Paid," page 44.
Maturity Benefit
The Maturity Date is the Contract Anniversary next following the
Insured's 95th birthday. If the Contract is still in force on
the Maturity Date, the Maturity Benefit will be paid to you.
The Maturity Benefit is equal to the Cash Surrender Value on the
Maturity Date.
Payment Options
The Contract offers a variety of ways of receiving proceeds
payable under the Contract, such as on surrender, death or
maturity, other than in a lump sum. These payment options are
summarized below. All of these options are forms of
fixed-benefit annuities which do not vary with the investment
performance of a separate account. Any agent authorized to sell
this Contract can further explain these options upon request.
You may apply proceeds of $2,000 or more which are payable under
this Contract to any of the following options:
Option 1 - Interest Payments. We will make interest payments
to the payee annually or monthly as elected. Interest on the
proceeds will be paid at the guaranteed rate of 3.0% per year
and may be increased by additional interest paid annually. The
proceeds and any unpaid interest may be withdrawn in full at any
time.
Option 2 - Installments of a Specified Amount. We will make
annual or monthly payments until the proceeds plus interest are
fully paid. Interest on the proceeds will be paid at the
guaranteed rate of 3.0% per year and may be increased by
additional interest. The present value of any unpaid
installments may be withdrawn at any time.
Option 3 - Installments For a Specified Period. Payment of the
proceeds may be made in equal annual or monthly payments for a
specified number of years. Interest on the proceeds will be
paid at the guaranteed rate of 3.0% per year and may be
increased by additional interest. The present value of any
unpaid installments may be withdrawn at any time.
Option 4 - Life Income. We will pay an income during the
payee's lifetime. A minimum guaranteed payment period may be
chosen. Payments received under the Installment Refund Option
will continue until the total income payments received equal the
proceeds applied.
Option 5 - Joint and Survivor Income. We will pay an income
during the lifetime of two persons and will continue to pay the
same income as long as either person is living. The minimum
guaranteed payment period will be ten years.
Minimum Amounts. Kansas City Life reserves the right to pay the
total amount of the Contract in one lump sum, if less than
$2,000. If payments are less than $50, payments may be made less
frequently at Kansas City Life's option.
If Kansas City Life has available at the time a payment option
is elected options or rates on a more favorable basis than those
guaranteed, the more favorable benefits will apply.
Specialized Uses of the Contract
Because the Contract provides for an accumulation of cash value as
well as a death benefit, the Contract can be used for various individual
and business financial planning purposes. Purchasing the Contract in
part for such purposes entails certain risks. For example, if the
investment performance of Subaccounts to which Variable Account Value
is allocated is poorer than expected or if sufficient premiums are not
paid, the Contract may lapse or may not accumulate sufficient Variable
Account Value to fund the purpose for which the Contract was purchased.
Partial surrenders and Contract loans may significally affect current
and future Contract Value, Cash Surrender Value, or Death Benefit
proceeds. Depending upon Subaccount investment performance and the
amount of a Contract loan, the loan may cause a Contract to lapse.
Because the Contract is designed to provide benefits on a long-term basis,
before purchasing a Contract for a specialized purpose a purchaser should
consider whether the long-term nature of the Contract is consistent with the
purpose for which it is being considered. Using a Contract for a specialized
purpose may have tax consequences. See "Tax Considerations" on page 47.
ILLUSTRATIONS OF CONTRACT VALUES, CASH SURRENDER VALUES, DEATH
BENEFITS AND ACCUMULATED PREMIUM PAYMENTS
The following tables have been prepared to illustrate
hypothetically how certain values under a Contract change with
investment performance over an extended period of time. The
tables illustrate how Contract Values, Cash Surrender Values and
Death Benefits under a Contract covering an Insured of a given
age on the Contract Date, would vary over time if planned premium
payments were paid annually and the return on the assets in each
of the Funds were an assumed uniform gross annual rate of 0%, 6%
and 12%. The values would be different from those shown if the
returns averaged 0%, 6% or 12% but fluctuated over and under
those averages throughout the years shown. The tables also show
Planned Periodic Premiums accumulated at 5% interest compounded
annually. The hypothetical investment rates of return are
illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of
return for a particular Contract may be more or less than the
hypothetical investment rates of return and will depend on a
number of factors including the investment allocations made by
an Owner and prevailing interest rates and rates of inflation.
These illustrations assume that Net Premiums are allocated
equally among the eleven Subaccounts available under the
Contract, and that no amounts are allocated to the Fixed
Account. These illustrations also assume that no Contract
loans have been made and that the premium is paid at the beginning
of each Contract Year. Values would be different if the
premiums are paid with a different frequency or in different amounts.
The illustrations reflect the fact that the net investment
return on the assets held in the Subaccounts is lower than the
gross after tax return of the selected Portfolios. The tables
assume an average annual expense ratio of 1.0% of the average
daily net assets of the Portfolios available under the
Contracts. This average annual expense ratio is based on the
expense ratios of each of the Portfolios for the last fiscal
year, adjusted, as appropriate, for any material changes in
expenses effective for the current fiscal year of a Portfolio.
For information on the Portfolios' expenses, see the
prospectuses for the Funds and Portfolios accompanying this
Prospectus.
In addition, the illustrations reflect the daily charge to the
Variable Account for assuming mortality and expense risks, which
is equivalent to an annual charge of 0.90%. After
deduction of Portfolio expenses and the mortality and expense
risk charge, the illustrated gross annual investment rates of
return of 0%, 6% and 12% would correspond to approximate net
annual rates of -1.89, 4.06% and 10.01%, respectively.
The illustrations also reflect the deduction of the Premium
Expense Charge and the Monthly Deduction. The Monthly Deduction
includes the cost of insurance charge, Kansas City Life has the
contractual right to charge higher guaranteed maximum charges than its
current cost of insurance charges. In addition, the bonus, which, if paid,
would partially offset the Monthly Deduction beginning in the eleventh
Contract Year, is not guaranteed and will be paid in Kansas City Life's sole
discretion. The current cost of insurance charges and payment of the bonus
beginning in the eleventh Contract Year and, alternatively, the guaranteed
cost of insurance charges and nonpayment of the bonus, are reflected in
separate illustrations on each of the following pages. All the illustrations
reflect the fact that no charges for Federal of state income taxes are
currently made against the Variable Account and assume no Indebtedness or
charges for supplemental and/or rider benefits.
The illustrations are based on Kansas City Life's sex distinct
rates for nonsmokers. Upon request, an Owner will be furnished
with a comparable illustration based upon the proposed Insured's
individual circumstances. Such illustrations may assume
different hypothetical rates of return than those illustrated in
the following tables.
<TABLE>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION A
USING CURRENT COST OF INSURANCE RATES
Male, Standard Nonsmoker, Age 35
<CAPTION>
0% Hypo Gr Inv Ret 6% Hypo Gr Invest Ret 12% Hypol Gr Invest Return
End of Prem Cash Cash Cash ContractAccum Contract Surrender Death Contract Surrender Death Contract Surrender Death
Contract Year 5% / Yr Value Value Benefit Value Value Benefit Value Value Benefit
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 481 0 100,000 523 0 100,000 566 0 100,000
2 2,153 1,182 263 100,000 1,306 386 100,000 1,434 515 100,000
3 3,310 1,860 460 100,000 2,109 709 100,000 2,378 978 100,000
4 4,526 2,514 814 100,000 2,934 1,234 100,000 3,406 1,706 100,000
5 5,802 3,144 1,144 100,000 3,780 1,780 100,000 4,524 2,524 100,000
6 7,142 3,747 1,785 100,000 4,646 2,684 100,000 5,741 3,779 100,000
7 8,549 4,323 2,411 100,000 5,532 3,620 100,000 7,064 5,152 100,000
8 10,027 4,871 3,009 100,000 6,438 4,576 100,000 8,505 6,643 100,000
9 11,578 5,392 3,580 100,000 7,364 5,552 100,000 10,075 8,263 100,000
10 13,207 5,882 4,372 100,000 8,308 6,798 100,000 11,786 10,276 100,000
15 22,657 8,139 8,139 100,000 13,717 13,717 100,000 23,633 23,633 100,000
20 34,719 9,580 9,580 100,000 19,863 19,863 100,000 42,840 42,840 100,000
25 50,113 9,719 9,719 100,000 26,532 26,532 100,000 74,572 74,572 100,000
30 69,761 7,675 7,675 100,000 33,284 33,284 100,000 126,952 126,952154,881
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS
INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER,
PREVAILING RATES AND RATES OF INFLATION. THE VALUES FOR A
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATION CAN
BE MADE BY KANSAS CITY LIFE OR ANY FUND THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<TABLE>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION A
USING GUARANTEED COST OF INSURANCE RATES
Male, Standard Nonsmoker, Age 35
<CAPTION>
0% Hypo Gr Invest Ret 6% Hypo Gr Invest Ret 12% Hypo Gr Invest Ret
End of Prem Cash Cash Cash ContractAccum Contract Surrender Death Contract
Surrender Death Contract Surrender Death
Year 5% / Yr Value Value Benefit Value Value Benefit Value Value Benefit
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 481 0 100,000 523 0 100,000 566 0 100,000
2 2,153 1,182 263 100,000 1,306 386 100,000 1,434 515 100,000
3 3,310 1,860 460 100,000 2,109 709 100,000 2,378 978 100,000
4 4,526 2,514 814 100,000 2,934 1,234 100,000 3,406 1,706 100,000
5 5,802 3,144 1,144 100,000 3,780 1,780 100,000 4,524 2,524 100,000
6 7,142 3,747 1,785 100,000 4,646 2,684 100,000 5,741 3,779 100,000
7 8,549 4,323 2,411 100,000 5,532 3,620 100,000 7,064 5,152 100,000
8 10,027 4,871 3,009 100,000 6,438 4,576 100,000 8,505 6,643 100,000
9 11,578 5,392 3,580 100,000 7,364 5,552 100,000 10,075 8,263 100,000
10 13,207 5,882 4,372 100,000 8,308 6,798 100,000 11,786 10,276 100,000
15 22,657 7,834 7,834 100,000 13,279 13,279 100,000 22,971 22,971 100,000
20 34,719 8,698 8,698 100,000 18,473 18,473 100,000 40,424 40,424 100,000
25 50,113 7,819 7,819 100,000 23,338 23,338 100,000 68,290 68,290 100,000
30 69,761 4,041 4,041 100,000 26,903 26,903 100,000 113,612 113,612138,607
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS
INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER,
PREVAILING RATES AND RATES OF INFLATION. THE VALUES FOR A
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATION CAN
BE MADE BY KANSAS CITY LIFE OR ANY FUND THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<TABLE>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION B
USING CURRENT COST OF INSURANCE RATES
Male, Standard Nonsmoker, Age 35
<CAPTION>
0% Hypo Gr Invest Ret 6% Hypo Gr Invest Ret 12% Hypo Gr Invest Ret
End of Prem Cash Cash Cash ContractAccum Contract Surrender Death Contract
Surrender Death Contract Surrender Death
Year 5% / Yr Value Value Benefit Value Value Benefit Value Value Benefit
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 480 0 100,480 522 0 100,522 565 0 100,565
2 2,153 1,179 79 101,179 1,302 202 101,302 1,430 330 101,430
3 3,310 1,853 453 101,853 2,100 700 102,100 2,369 969 102,369
4 4,526 2,502 802 102,502 2,919 1,219 102,919 3,388 1,688 103,388
5 5,802 3,124 1,124 103,124 3,755 1,755 103,755 4,494 2,494 104,494
6 7,142 3,718 1,756 103,718 4,609 2,647 104,609 5,694 3,732 105,694
7 8,549 4,283 2,371 104,283 5,479 3,567 105,479 6,994 5,082 106,994
8 10,027 4,819 2,957 104,819 6,365 4,503 106,365 8,404 6,542 108,404
9 11,578 5,324 3,512 105,324 7,266 5,454 107,266 9,934 8,122 109,934
10 13,207 5,796 4,286 105,796 8,179 6,669 108,179 11,592 10,082 111,592
15 22,657 7,922 7,922 107,922 13,317 13,317 113,317 22,894 22,894 122,894
20 34,719 9,135 9,135 109,135 18,852 18,852 118,852 40,509 40,509 140,509
25 50,113 8,901 8,901 108,901 24,196 24,196 124,196 67,738 67,738 167,738
30 69,761 6,331 6,331 106,331 28,162 28,162 128,162 109,501 109,501209,501
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS
INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER,
PREVAILING RATES AND RATES OF INFLATION. THE VALUES FOR A
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATION CAN
BE MADE BY KANSAS CITY LIFE OR ANY FUND THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<TABLE>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION B
USING GUARANTEED COST OF INSURANCE RATES
Male, Standard Nonsmoker, Age 35
<CAPTION>
0% Hypo Gr Invest Ret 6% Hypo Gr Invest Ret 12% Hypo Gr Invest Ret
End of Prem Cash Cash Cash ContractAccum Contract Surrender Death Contract
Surrender Death Contract Surrender Death
Year 5% / Yr Value Value Benefit Value Value Benefit Value Value Benefit
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 480 0 100,480 522 0 100,522 565 0 100,565
2 2,153 1,179 79 101,179 1,302 202 101,302 1,430 330 101,430
3 3,310 1,853 453 101,853 2,100 700 102,100 2,369 969 102,369
4 4,526 2,502 802 102,502 2,919 1,219 102,919 3,388 1,688 103,388
5 5,802 3,124 1,124 103,124 3,755 1,755 103,755 4,494 2,494 104,494
6 7,142 3,718 1,756 103,718 4,609 2,647 104,609 5,694 3,732 105,694
7 8,549 4,283 2,371 104,283 5,479 3,567 105,479 6,994 5,082 106,994
8 10,027 4,819 2,957 104,819 6,365 4,503 106,365 8,404 6,542 108,404
9 11,578 5,324 3,512 105,324 7,266 5,454 107,266 9,934 8,122 109,934
10 13,207 5,796 4,286 105,796 8,179 6,669 108,179 11,592 10,082 111,592
15 22,657 7,611 7,611 107,611 12,869 12,869 112,869 22,214 22,214 122,214
20 34,719 8,231 8,231 108,231 17,411 17,411 117,411 37,973 37,973 137,973
25 50,113 6,970 6,970 106,970 20,855 20,855 120,855 60,952 60,952 160,952
30 69,761 2,758 2,758 102,758 21,542 21,542 121,542 93,939 93,939 193,939
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS
INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER,
PREVAILING RATES AND RATES OF INFLATION. THE VALUES FOR A
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATION CAN
BE MADE BY KANSAS CITY LIFE OR ANY FUND THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<TABLE>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION A
USING CURRENT COST OF INSURANCE RATES
Female, Standard Nonsmoker, Age 35
<CAPTION>
0% Hypo Gr Invest Ret 6% Hypo Gr Invest Ret 12% Hypo Gr Invest Ret
End of Prem Cash Cash Cash ContractAccum Contract Surrender Death Contract
Surrender Death Contract Surrender Death
Year 5% / Yr Value Value Benefit Value Value Benefit Value Value Benefit
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 502 0 100,000 546 0 100,000 589 0 100,000
2 2,153 1,224 335 100,000 1,350 461 100,000 1,481 593 100,000
3 3,310 1,922 522 100,000 2,176 776 100,000 2,452 1,052 100,000
4 4,526 2,595 895 100,000 3,024 1,324 100,000 3,508 1,808 100,000
5 5,802 3,243 1,447 100,000 3,895 2,099 100,000 4,658 2,862 100,000
6 7,142 3,864 2,118 100,000 4,786 3,040 100,000 5,909 4,163 100,000
7 8,549 4,458 2,762 100,000 5,699 4,003 100,000 7,270 5,574 100,000
8 10,027 5,025 3,379 100,000 6,633 4,987 100,000 8,754 7,108 100,000
9 11,578 5,566 3,970 100,000 7,591 5,995 100,000 10,373 8,777 100,000
10 13,207 6,082 4,752 100,000 8,573 7,243 100,000 12,143 10,813 100,000
15 22,657 8,642 8,642 100,000 14,396 14,396 100,000 24,594 24,594 100,000
20 34,719 10,706 10,706 100,000 21,404 21,404 100,000 45,080 45,080 100,000
25 50,113 12,143 12,143 100,000 29,817 29,817 100,000 79,173 79,173 106,092
30 69,761 12,554 12,554 100,000 39,774 39,774 100,000 135,379 135,379 165,163
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS
INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER,
PREVAILING RATES AND RATES OF INFLATION. THE VALUES FOR A
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATION CAN
BE MADE BY KANSAS CITY LIFE OR ANY FUND THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<TABLE>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION A
USING GUARANTEED COST OF INSURANCE RATES
Female, Standard Nonsmoker, Age 35
<CAPTION>
0% Hypo Gr Invest Ret 6% Hypo Gr Invest Ret 12% Hypo Gr Invest Ret
End of Prem Cash Cash Cash ContractAccum Contract Surrender Death Contract
Surrender Death Contract Surrender Death
Year 5% / Yr Value Value Benefit Value Value Benefit Value Value Benefit
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 502 0 100,000 546 0 100,000 589 0 100,000
2 2,153 1,224 335 100,000 1,350 461 100,000 1,481 593 100,000
3 3,310 1,922 522 100,000 2,176 776 100,000 2,452 1,052 100,000
4 4,526 2,595 895 100,000 3,024 1,324 100,000 3,508 1,808 100,000
5 5,802 3,243 1,447 100,000 3,895 2,099 100,000 4,658 2,862 100,000
6 7,142 3,864 2,118 100,000 4,786 3,040 100,000 5,909 4,163 100,000
7 8,549 4,458 2,762 100,000 5,699 4,003 100,000 7,270 5,574 100,000
8 10,027 5,025 3,379 100,000 6,633 4,987 100,000 8,754 7,108 100,000
9 11,578 5,566 3,970 100,000 7,591 5,995 100,000 10,373 8,777 100,000
10 13,207 6,082 4,752 100,000 8,573 7,243 100,000 12,143 10,813 100,000
15 22,657 8,247 8,247 100,000 13,858 13,858 100,000 23,820 23,820 100,000
20 34,719 9,581 9,581 100,000 19,717 19,717 100,000 42,311 42,311 100,000
25 50,113 9,876 9,876 100,000 26,111 26,111 100,000 72,236 72,236 100,000
30 69,761 8,665 8,665 100,000 32,887 32,887 100,000 120,816 120,816147,396
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS
INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER,
PREVAILING RATES AND RATES OF INFLATION. THE VALUES FOR A
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATION CAN
BE MADE BY KANSAS CITY LIFE OR ANY FUND THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<TABLE>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION B
USING CURRENT COST OF INSURANCE RATES
Female, Standard Nonsmoker, Age 35
<CAPTION>
0% Hypo Gr Invest Ret 6% Hypo Gr Invest Ret 12% Hypo Gr Invest Ret
End of Prem Cash Cash Cash ContractAccum Contract Surrender Death Contract
Surrender Death Contract Surrender Death
Year 5% / Yr Value Value Benefit Value Value Benefit Value Value Benefit
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 501 0 100,501 545 0 100,545 588 0 100,588
2 2,153 1,221 136 101,221 1,346 262 101,346 1,477 393 101,477
3 3,310 1,915 515 101,915 2,168 768 102,168 2,443 1,043 102,443
4 4,526 2,583 883 102,583 3,011 1,311 103,011 3,492 1,792 103,492
5 5,802 3,225 1,429 103,225 3,873 2,077 103,873 4,631 2,835 104,631
6 7,142 3,838 2,092 103,838 4,753 3,007 104,753 5,866 4,120 105,866
7 8,549 4,421 2,725 104,421 5,650 3,954 105,650 7,205 5,509 107,205
8 10,027 4,976 3,330 104,976 6,565 4,919 106,565 8,660 7,014 108,660
9 11,578 5,503 3,907 105,503 7,499 5,903 107,499 10,241 8,645 110,241
10 13,207 6,002 4,672 106,002 8,453 7,123 108,453 11,962 10,632 111,962
15 22,657 8,451 8,451 108,451 14,045 14,045 114,045 23,944 23,944 123,944
20 34,719 10,338 10,338 110,338 20,574 20,574 120,574 43,168 43,168 143,168
25 50,113 11,508 11,508 111,508 28,047 28,047 128,047 74,066 74,066 174,066
30 69,761 11,505 11,505 111,505 36,128 36,128 136,128 123,554 123,554223,554
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS
INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER,
PREVAILING RATES AND RATES OF INFLATION. THE VALUES FOR A
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATION CAN
BE MADE BY KANSAS CITY LIFE OR ANY FUND THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<TABLE>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION B
USING GUARANTEED COST OF INSURANCE RATES
Female, Standard Nonsmoker, Age 35
<CAPTION>
0% Hypo Gr Invest Ret 6% Hypo Gr Invest Ret 12% Hypo Gr Invest Ret
End of Prem Cash Cash Cash ContractAccum Contract Surrender Death Contract
Surrender Death Contract Surrender Death
Year 5% / Yr Value Value Benefit Value Value Benefit Value Value Benefit
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 501 0 100,501 545 0 100,545 588 0 100,588
2 2,153 1,221 136 101,221 1,346 262 101,346 1,477 393 101,477
3 3,310 1,915 515 101,915 2,168 768 102,168 2,443 1,043 102,443
4 4,526 2,583 883 102,583 3,011 1,311 103,011 3,492 1,792 103,492
5 5,802 3,225 1,429 103,225 3,873 2,077 103,873 4,631 2,835 104,631
6 7,142 3,838 2,092 103,838 4,753 3,007 104,753 5,866 4,120 105,866
7 8,549 4,421 2,725 104,421 5,650 3,954 105,650 7,205 5,509 107,205
8 10,027 4,976 3,330 104,976 6,565 4,919 106,565 8,660 7,014 108,660
9 11,578 5,503 3,907 105,503 7,499 5,903 107,499 10,241 8,645 110,241
10 13,207 6,002 4,672 106,002 8,453 7,123 108,453 11,962 10,632 111,962
15 22,657 8,042 8,042 108,042 13,482 13,482 113,482 23,128 23,128 123,128
20 34,719 9,163 9,163 109,163 18,775 18,775 118,775 40,147 40,147 140,147
25 50,113 9,139 9,139 109,139 24,025 24,025 124,025 66,166 66,166 166,166
30 69,761 7,492 7,492 107,492 28,576 28,576 128,576 105,968 105,968205,968
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS
INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER,
PREVAILING RATES AND RATES OF INFLATION. THE VALUES FOR A
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATION CAN
BE MADE BY KANSAS CITY LIFE OR ANY FUND THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
OTHER CONTRACT BENEFITS AND PROVISIONS
Limits on Rights to Contest the Contract
Incontestability. After the Contract has been in force during
the Insured's lifetime for two years from the Contract Date,
Kansas City Life may not contest the Contract, except if the
Contract lapses after the end of a grace period.
Any increase in the Specified Amount will not be contested after
the increase has been in force during the Insured's lifetime for
two years following the effective date of the increase.
If a Contract lapses and it is reinstated, we cannot contest the
reinstated Contract after the Contract has been in force during
the Insured's lifetime for two years from the date of the
reinstatement application.
Suicide Exclusion. If the Insured dies by suicide, while sane
or insane, within two years of the Contract Date (or less if
required by state law), the amount payable by Kansas City
Life will be equal to the Contract Value less any Indebtedness.
If the Insured dies by suicide, while sane or insane, within two
years after the effective date of any increase in the Specified
Amount (or less if required by state law), the amount payable
by Kansas City Life associated with such increase will be limited
to the cost of insurance charges associated with the increase.
Changes in the Contract or Benefits
Misstatement of Age or Sex. If, while the Contract is in force
and the Insured is alive, it is determined that the Age or sex
of the Insured as stated in the Contract is not correct, Kansas
City Life will adjust the Contract Value under the Contract.
The adjustment to the Contract Value will be the difference
between the following amounts accumulated at 4% interest
annually. The two amounts are: (1) the cost of insurance
deductions that have been made; and (2) the cost of insurance
deductions that should have been made. If, after the death of
the Insured while this Contract is in force, it is determined
the Age or sex of the Insured as stated in the Contract is not
correct, the Death Benefit will be the net amount at risk that
the most recent cost of insurance deductions at the correct Age
and sex would have provided plus the Contract Value on the date
of death (unless otherwise required by state law).
Other Changes. Upon notice, Kansas City Life may modify the
Contract, but only if such modification is necessary to: (1)
make the Contract or the Variable Account comply with any
applicable law or regulation issued by a governmental agency to
which Kansas City Life is subject; (2) assure continued
qualification of the Contract under the Internal Revenue Code or
other federal or state laws relating to variable life contracts;
(3) reflect a change in the operation of the Variable Account;
or (4) provide additional Variable Account and/or fixed
accumulation options. Kansas City Life reserves the right to
modify the Contract as necessary to attempt to prevent the
Contract Owner from being considered the owner of the assets of
the Variable Account. In the event of any such modification,
Kansas City Life will issue an appropriate endorsement to the
Contract, if required. Kansas City Life will exercise these rights
in accordance with applicable law, including approval of Contract
Owners if required.
When Proceeds Are Paid
Kansas City Life will ordinarily pay any Death Benefit proceeds,
loan proceeds, partial surrender proceeds, or full surrender
proceeds within seven calendar days after receipt at the Home
Office of all the documents required for such a payment. Other
than the Death Benefit, which is determined as of the date of
death, the amount will be determined as of the date of receipt
of required documents. However, Kansas City Life may delay
making a payment or processing a transfer request if (1) the New
York Stock Exchange is closed for other than a regular holiday
or weekend, trading is restricted by the SEC, or the SEC
declares that an emergency exists as a result of which the
disposal or valuation of Variable Account assets is not
reasonably practicable; or (2) the SEC by order permits
postponement of payment to protect Kansas City Life's Contract
Owners.
Reports to Contract Owners
At least once each Contract Year, you will be sent a report at
your last known address showing, as of the end of the current
report period: the Death Benefit; Contract Value; Fixed Account
Value; Variable Account Value; Indebtedness; Subaccount values;
premiums paid since the last report; surrenders since the last
report; any Contract loans and accrued interest; Cash Surrender
Value; current premium allocations; charges deducted since the
last report; and any other information required by law. You
will also be sent an annual and a semi-annual report for each
Fund or Portfolio underlying a Subaccount to which you have
allocated Contract Value, including a list of the securities
held in each Fund, as required by the 1940 Act. In addition,
when you pay premium payments (except for premiums deducted
automatically), or if you take out a loan, transfer amounts
among the Variable Accounts and Fixed Account or take
surrenders, you will receive a written confirmation of these
transactions.
Assignment
The Contract may be assigned in accordance with its terms. In
order for any assignment to be binding upon Kansas City Life, it
must be in writing and filed at the Home Office. Once Kansas
City Life has received a signed copy of the assignment, the
Owner's rights and the interest of any Beneficiary (or any other
person) will be subject to the assignment. Kansas City Life
assumes no responsibility for the validity or sufficiency of any
assignment. An assignment is subject to any Indebtedness.
Reinstatement
The Contract may be reinstated within two years (or such longer
period if required by state law) after lapse and before the
Maturity Date, subject to compliance with certain
conditions, including the payment of a necessary premium payment
and submission of satisfactory evidence of insurability. See
your Contract for further information.
Supplemental and/or Rider Benefits
The following supplemental and/or rider benefits are available
and may be added to your Contract. Monthly charges for these
benefits and/or riders will be deducted from your Contract Value
as part of the Monthly Deduction. All of these riders may not be
available in all states.
Disability Continuance of Insurance (DCOI)
Issue Ages: 15-55, renewal through age 59
This rider covers the Contract's Monthly Deductions during the period of
total disability of the Insured. DCOI benefits become payable after the
Insured's total disability exists for six consecutive months and total
disability occurs before age 60. Benefits under this rider continue until the
Insured is no longer totally disabled.
Accidental Death Benefit (ADB)
Issue Ages: 0-60
This rider provides for the payment of an additional amount of insurance
in the event of accidental death. The rider terminates when the Insured
attains age 70.
Option to Increase Specified Amount (Assured Insurability - AI)
Issue Ages: 0-38
This rider allows the Specified Amount of the Contract to
increase by the option amount or less, without evidence of
insurability on the Insured. These increases may occur on
regular option dates or alternate option dates. See the rider
contract for the specific dates.
Spouse's Term insurance (STI)
Issue Ages: 15-50 (Spouse's age)
This rider provides decreasing term insurance on the Insured's spouse.
Theamount of insurance coverage is expressed in units and a maximum number of
five units may be purchased. The amount of insurance per unit of coverage is
based on the Insured Spouse's attained age. A table specifying the amount of
insurance per unit of coverage is in the rider contract.
Children's Term Insurance (CTI)
Issue Ages: 14 Days - 17 Years (Children's ages)
This rider provides level term insurance on each Insured Child. This term
insurance continues until the Contract anniversary on which the Insured Child's
attained age is 25. The rider expires on the Contract Anniversary on which the
Insured is age 65.
Other Insured Term Insurance (OI)
Issue Ages: 0-65 (Other Insured's age)
This rider provides level yearly renewable term coverage on the Insured,
the Insured's spouse, and/or children. The coverage
expires at the earlier of the Contract Anniversary on which the
Insured or the Other Insured is age 95 unless an earlier date is
requested. The term insurance provided by this rider can be
converted to a permanent contract at any time the rider is in
force without evidence of insurability.
Extra Protection (EXP)
Issue Ages: 0-80
This rider provides level yearly renewable term coverage on the Insured.
The coverage expires at the Contract Anniversary on
which the Insured is age 95 unless an earlier date is requested.
Disability Premium Benefit Rider (DPB)
Issue Ages: 15-55, renewal through 59
This rider provides for the payment of the disability premium benefit
amount as premium to the Contract during a period of total disability of the
Insured. The DPB benefit amount is a
monthly amount that is requested by the Owner.
The Other Insured Term Insurance and Extra Protection riders
permit an Owner, by purchasing term insurance, to increase
insurance coverage without increasing the Contract's Specified
Amount. However, you should be aware that the cost of insurance
charges and Surrender Charges associated with purchasing
insurance coverage under these term riders may be different than
would be associated with increasing the Specified Amount under
the Contract.
The Other Insured rider has one risk class for nonsmokers and
one risk class for smokers. The nonsmoker cost of insurance
rates for this rider are generally between the Contract's
preferred and standard nonsmoker rates. The smoker cost of
insurance rates are near the Contract's smoker rates. The cost
of insurance rates for the Extra Protection Rider are generally
lower than the Contract's rates. In addition, since the term
insurance riders do not have surrender charges, a Contract
providing insurance coverage with a combination of Specified
Amount and term insurance will have a lower maximum Surrender
Charge than a Contract with the same amount of insurance
coverage provided solely by the Specified Amount. In addition,
sales representatives generally receive somewhat lower
compensation from a term insurance rider than if the insurance
coverage were part of the Contract's Specified Amount.
Your determination as to how to purchase a desired level of
insurance coverage should be based on your specific insurance
needs. Consult your sales representative for further
information.
Additional rules and limits apply to these supplemental and/or
rider benefits. Not all such benefits may be available at any
time, and supplemental and/or rider benefits in addition to
those listed above may be made available. Please ask your
Kansas City Life agent for further information, or contact the
Home Office.
TAX CONSIDERATIONS
The following summary provides a general description of the
Federal income tax considerations associated with the Contract
and does not purport to be complete or to cover all situations.
This discussion is not intended as tax advice. Counsel or other
competent tax advisers should be consulted for more complete
information. This discussion is based upon Kansas City Life's
understanding of the present Federal income tax laws as they are
currently interpreted by the Internal Revenue Service (the
"Service"). No representation is made as to the likelihood of
continuation of the present Federal income tax laws or of the
current interpretations by the Service.
Tax Status of the Contract
Section 7702 of the Internal Revenue Code of 1986, as amended
(the "Code") sets forth a definition of a life insurance
contract for Federal income tax purposes. Although the
Secretary of the Treasury (the "Treasury") is authorized to
prescribe regulations implementing Section 7702, while proposed
regulations and other interim guidance has been issued, final
regulations have not been adopted. In short, guidance as to how
Section 7702 is to be applied is limited. If a Contract were
determined not to be a life insurance contract for purposes of
Section 7702, such Contract would not provide the tax advantages
normally provided by a life insurance contract.
With respect to a Contract issued on a standard basis, Kansas
City Life believes that such a Contract should meet the Section
7702 definition of a life insurance contract. With respect to a
Contract that is issued on a substandard basis (i.e., a premium
class with extra rating involving higher than standard mortality
risk), there is less guidance, in particular as to how the
mortality and other expense requirements of Section 7702 are to
be applied in determining whether such a Contract meets the
Section 7702 definition of a life insurance contract. Thus, it
is not clear whether or not a Contract issued on a substandard
basis would satisfy Section 7702, particularly if the owner pays
the full amount of premiums permitted under the Contract.
If it is subsequently determined that a Contract does not
satisfy Section 7702, Kansas City Life may take whatever steps
are appropriate and reasonable to attempt to cause such a
Contract to comply with Section 7702. For these reasons, Kansas
City Life reserves the right to restrict Contract transactions
as necessary to attempt to qualify it as a life insurance
contract under Section 7702.
Section 817(h) of the Code requires that the investments of each
of the Subaccounts must be "adequately diversified" in
accordance with Treasury regulations in order for the Contract
to qualify as a life insurance contract under Section 7702 of
the Code (discussed above). The Subaccounts, through the
Portfolios, intend to comply with the diversification
requirements prescribed in Treas. Reg. 1.817-5, which affect
how the Portfolio's assets are to be invested. Kansas City Life
believes that the Subaccounts will, thus, meet the
diversification requirements, and Kansas City Life will monitor
continued compliance with this requirement.
In certain circumstances, owners of variable life insurance
contracts may be considered the owners, for federal income tax
purposes, of the assets of the subaccounts used to support their
contracts. In those circumstances, income and gains from the
subaccount assets would be includible in the variable contract
owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of
subaccount assets if the contract owner possesses incidents of
ownership in those assets, such as the ability to exercise
investment control over the assets. The Treasury Department has
also announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do not
provide guidance concerning the circumstances in which investor
control of the investments of a segregated asset account may
cause the investor (i.e., the Contract Owner), rather than the
insurance company, to be treated as the owner of the assets in
the account." This announcement also stated that guidance would
be issued by way of regulations or rulings on the "extent to
which Contractholders may direct their investments to particular
subaccounts without being treated as owners of the underlying
assets."
The ownership rights under the Contract are similar to, but
different in certain respects from, those described by the IRS
in rulings in which it was determined that contractowners were
not owners of subaccount assets. For example, an Owner has
additional flexibility in allocating Net Premium payments and
Contract Value. These differences could result in an Owner
being treated as the owner of a pro rata portion of the assets
of the Subaccounts. In addition, Kansas City Life does not know
what standards will be set forth, if any, in the regulations or
rulings which the Treasury Department has stated it expects to
issue. Kansas City Life therefore reserves the right to modify
the Contract as necessary to attempt to prevent an Owner from
being considered the Owner of a pro rata share of the assets of
the Subaccounts.
The following discussion assumes that the Contract will qualify
as a life insurance contract for Federal income tax purposes.
Tax Treatment of Contract Benefits
In General. Kansas City Life believes that the proceeds and
Contract Value increases of a Contract should be treated in a
manner consistent with a fixed-benefit life insurance Contract
for Federal income tax purposes. Thus, the death benefit under
the Contract should be excludible from the gross income of the
beneficiary under Section 101(a)(1) of the Code.
Depending on the circumstances, the exchange of a Contract, a
change in the Contract's Coverage Option, a Contract loan, a
partial surrender, a surrender, a change in ownership, or an
assignment of the Contract may have Federal income tax
consequences. In addition, federal, state and local transfer,
and other tax consequences of ownership or receipt of Contract
proceeds depends on the circumstances of each Owner or
beneficiary.
The Contract may also be used in various arrangements, including
nonqualified deferred compensation or salary continuance plans,
split dollar insurance plans, executive bonus plans, retiree
medical benefit plans and others. The tax consequences of such
plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you
are contemplating the use of a Contract in any arrangement the
value of which depends in part on its tax consequences, you
should be sure to consult a qualified tax adviser regarding the
tax attributes of the particular arrangement.
Generally, the Owner will not be deemed to be in constructive
receipt of the Contract Value, including increments thereof,
until there is a distribution. The tax consequences of
distributions from, and loans taken from or secured by, a
Contract depend on whether the Contract is classified as a
"Modified Endowment Contract." Whether a Contract is or is not
a Modified Endowment Contract, upon a complete surrender or
lapse of a Contract or when benefits are paid at a Contract's
Maturity Date, if the amount received plus the amount of
Indebtedness exceeds the total investment in the Contract, the
excess will generally be treated as ordinary income subject to
tax.
Modified Endowment Contracts. Section 7702A establishes a class
of life insurance contracts designated as "Modified Endowment
Contracts." The rules relating to whether a Contract will be
treated as a Modified Endowment Contract are extremely complex
and cannot be adequately described in the limited confines of
this summary. In general, a Contract will be a Modified
Endowment Contract if the accumulated premiums paid at any time
during the first seven Contract Years exceed the sum of the net
level premiums which would have been paid on or before such time
if the Contract provided for paid-up future benefits after the
payment of seven level annual premiums. A Contract may also
become a Modified Endowment Contract after a material change.
The determination of whether a Contract will be a Modified
Endowment Contract after a material change generally depends
upon the relationship of the death benefit and Contract Value at
the time of such change and the additional premiums paid in the
seven years following the material change.
Due to the Contract's flexibility, classification as a Modified
Endowment Contract will depend on the individual circumstances
of each Contract. In view of the foregoing, a current or
prospective Owner should consult with a tax adviser to determine
whether a Contract transaction will cause the Contract to be
treated as a Modified Endowment Contract. However, at the time
a premium is credited which in Kansas City Life's view would
cause the Contract to become a Modified Endowment Contract,
Kansas City Life will notify the Owner that unless a refund of
the excess premium (with any appropriate interest) is requested
by the Owner, the Contract will become a Modified Endowment
Contract. The Owner will have 30 days after receiving such
notification to request the refund.
Distributions from Contracts Classified as Modified Endowment
Contracts. Contracts classified as Modified Endowment Contracts
will be subject to the following tax rules: First, all
distributions, including distributions upon surrender and
partial surrender from such a Contract are treated as ordinary
income subject to tax up to the amount equal to the excess (if
any) of the Contract Value immediately before the distribution
over the investment in the Contract (described below) at such
time. Second, loans taken from or secured by such a Contract,
are treated as distributions from the Contract and taxed
accordingly. Past due loan interest that is added to the loan
amount will be treated as a loan. Third, a 10 percent
additional income tax is imposed on the portion of any
distribution from, or loan taken from or secured by, such a
Contract that is included in income except where the
distribution or loan is made on or after the Owner attains age
59.5, is attributable to the Owner's becoming disabled, or is
part of a series of substantially equal periodic payments for
the life (or life expectancy) of the Owner or the joint lives
(or joint life expectancies) of the Owner and the Owner's
beneficiary.
If a Contract becomes a modified endowment contract after it is
issued, distributions made during the Contract Year in which
it becomes a modified endowment contract, distributions in any
subsequent Contract Year and distributions within two years before
the Contract becomes a modified endowment contract will be
subject to the tax treatment described above. This means that
a distribution from a Contract that is not a modified endowment
contract could later become taxable as a distribution from a modified
endowment contract.
Distributions From Contracts Not Classified as Modified
Endowment Contracts. Distributions from a Contract that is not
a Modified Endowment Contract are generally treated as first,
recovering the investment in the Contract (described below) and
then, only after the return of all such investment in the
Contract, as distributing taxable income. An exception to this
general rule occurs in the case of a decrease in the Contract's
death benefit or any other change that reduces benefits under
the Contract in the first 15 years after the Contract is issued
and that results in a cash distribution to the Owner in order
for the Contract to continue complying with the Section 7702
definitional limits. Such a cash distribution will be taxed in
whole or in part as ordinary income (to the extent of any gain
in the Contract) under rules prescribed in Section 7702.
Loans from, or secured by, a Contract that is not a Modified
Endowment Contract are not treated as distributions. Instead,
such loans are treated as Indebtedness of the Owner.
Finally, neither distributions (including distributions upon
surrender) nor loans from, or secured by, a Contract that is not
a Modified Endowment Contract are subject to the 10 percent
additional income tax rule.
Contract Loan Interest. Generally, consumer interest paid on
any loan under a Contract which is owned by an individual is not
deductible. The deduction of other forms of interest paid on
Contract loans may also be subject to restrictions under the
Code. A qualified tax adviser should be consulted before deducting
any Contract loan interest.
Investment in the Contract. Investment in the Contract means:
(i) the aggregate amount of any premiums or other consideration
paid for a Contract, minus (ii) the aggregate amount received
under the Contract which is excluded from gross income of the
Owner (except that the amount of any loan from, or secured by, a
Contract that is a Modified Endowment Contract, to the extent
such amount is excluded from gross income, will be disregarded),
plus (iii) the amount of any loan from, or secured by, a
Contract that is a Modified Endowment Contract to the extent
that such amount is included in the gross income of the owner.
Multiple Contracts. All Modified Endowment Contracts that are
issued by Kansas City Life (or its affiliates) to the same Owner
during any calendar year are treated as one Modified Endowment
Contract for purposes of determining the amount includible in an
Owner's gross income under Section 72(e) of the Code.
Possible Charge for Kansas City Life's Taxes
At the present time, Kansas City Life makes no charge for any
Federal, state or local taxes (other than the charge for state
and local premium taxes) that it incurs that may be attributable
to the Subaccounts or to the Contracts. Kansas City Life,
however, reserves the right in the future to make additional
charges for any such tax or other economic burden resulting from
the application of the tax laws that it determines to be
properly attributable to the Subaccounts or to the Contracts.
OTHER INFORMATION ABOUT THE CONTRACTS AND KANSAS CITY LIFE
Sale of the Contracts
The Contracts will be offered to the public on a continuous
basis, and we do not anticipate discontinuing the offering of
the Contracts. However, we reserve the right to discontinue the
offering. Applications for Contracts are solicited by agents
who are licensed by applicable state insurance authorities to
sell our variable life contracts and who are also registered
representatives of Sunset Financial Services, Inc. ("Sunset
Financial"), one of our wholly-owned subsidiaries or of broker-
dealers who have entered into written sales agreements with Sunset
Financial. Sunset Financial is registered with the SEC under the
Securities Exchange Act of 1934 as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc.
Sunset Financial acts as the Principal Underwriter, as defined
in the 1940 Act, of the Contracts for the Variable Account
pursuant to an Underwriting Agreement between Kansas City Life
and Sunset Financial. Sunset Financial is not obligated to sell
any specific number of Contracts. Sunset Financial's principal
business address is P.O. Box 419365, Kansas City, Missouri
64141-6365.
Registered representatives may be paid commissions on a Contract they sell
based on premiums paid in amounts up to 50% of premiums paid during the first
Contract Year and up to 3% on premiums paid after the first Contract Year.
Additional commissions may be paid in certain circumstances. Other allowances
and overrides also may be paid.
Kansas City Life Directors and Executive Officers
The following table sets forth the name, address and principal
occupations during the past five years of each of Kansas City
Life's directors and executive officers.
Name and Principal
Business Address* Principal Occupation During Past Five Years
Joseph R. Bixby Director, Kansas City Life; Chairman of the
Board since 1972; President from 1964 until he retired in April, 1990;
responsible for overall corporate policy. Director of Sunset Life, a
subsidiary of Kansas City Life.
Walter E. Bixby Director, Kansas City Life; Vice Chairman of
the Board since 1974; elected Executive Vice President in January, 1987 and
President and CEO in April, 1990; primarily responsible for the operation of
the Company. Chairman of the Board of Sunset Life and President and Chairman
of the Board of Old American Insurance Company, subsidiaries of Kansas City
Life.
R. Philip Bixby Director, Kansas City Life; Elected
Assistant Secretary in 1979; Assistant Vice President in 1982, Vice President
in 1984 and Senior Vice President, Operations, in 1990; Executive Vice
President in 1996.
W. E. Bixby, III Director and President Old American Insurance
Company, a subsidiary of Kansas City Life.
Charles R. Duffy Jr. Elected Vice President, Insurance
Administration, in November, 1989; responsible for Kansas City
Life's computer operations, Senior Account Executive, Cybertek
Corporation, January, 1989 to November, 1989; Senior Vice President,
Operations in 1996; Director of Sunset Life and Old American, subsidiaries of
Kansas City Life.
Richard L. Finn Director, Kansas City Life; Elected Vice
President in 1976; Financial Vice President in 1983 and Senior Vice President,
Finance, in 1984; Chief Financial Officer and responsible for investment of
Kansas City Life's funds, accounting and taxes. Director, Vice President and
Chief Financial Officer of Old American, a subsidiary of Kansas City Life.
Jack D. Hayes Director, Kansas City Life; Elected Senior Vice
President, Marketing in February, 1994, responsible for
Marketing, Marketing Administration, Communications and Public
Relations. Served as Executive Vice President and Chief
Marketing Officer of Fidelity Union Life, Dallas, Texas, from
June, 1981 to January, 1994.
Francis P. Lemery Director, Kansas City Life; Elected Vice
President in 1979; Vice President and Actuary in 1980, and
Senior Vice President and Actuary in 1984; responsible for Group
Insurance Department, Actuarial Services, State Compliance and
New Business Issue and Underwriting. Director of Sunset Life
and Old American, subsidiaries of Kansas City Life.
C. John Malacarne Director, Kansas City Life; Elected
Associate General Counsel in 1976; General Counsel in 1980; Vice
President and General Counsel in 1981; and Vice President,
General Counsel and Secretary in 1991. Responsible for Legal
Department, Office of the Secretary and Stock Transfer
Department. Director of Sunset Life and Director and Secretary
of Old American, subsidiaries of Kansas City Life.
Robert C. Miller Elected Assistant Auditor in 1972; Auditor
in 1973; Vice President and Auditor in 1987, and Senior Vice
President, Administrative Services, in 1991. Responsible for
Human Resources and Home Office building and maintenance.
David D. Dysart Director, Kansas City Life since 1972;
served as Executive Vice President, Kansas City Life, from 1980 until
retirement in 1987.
Webb R. Gilmore Director, Kansas City Life since 1990;
Partner - Gilmore and Bell.
Nancy Bixby Hudson Director, Kansas City Life since 1996;
Investor
Warren J. Hunzicker, M.D. Director, Kansas City Life since 1989.
Daryl D. Jensen Director, Kansas City Life; Elected Vice
Chairman of the Board and President, Sunset Life Insurance
Company of America, a subsidiary of Kansas City Life, in 1975.
Michael J. Ross Director, Kansas City Life since 1972;
President and Chairman of the Board, Jefferson Bank and Trust
Company, St. Louis, Missouri, since 1971.
Larry Winn Jr. Director, Kansas City Life since 1985; Retired
as the Kansas Third District Representative to the U.S. Congress.
John K. Koetting Elected Assistant Controller in 1975 and
Vice President and Controller in 1980; chief accounting officer;
responsible for all corporate accounting reports. Director and
Vice President and Controller of Old American, a subsidiary of
Kansas City Life.
* The principal business address of all the persons listed
above is 3520 Broadway, Kansas City, Missouri 64111.
State Regulation
Kansas City Life is subject to regulation by the Department of
Insurance of the State of Missouri, which periodically examines
the financial condition and operations of Kansas City Life.
Kansas City Life is also subject to the insurance laws and
regulations of all jurisdictions where it does business. The
Contract described in this prospectus has been filed with and,
where required, approved by, insurance officials in those
jurisdictions where it is sold.
Kansas City Life is required to submit annual statements of
operations, including financial statements, to the insurance
departments of the various jurisdictions where it does business
to determine solvency and compliance with applicable insurance
laws and regulations.
Additional Information
A registration statement under the Securities Act of 1933 has
been filed with the SEC relating to the offering described in
this prospectus. This prospectus does not include all the
information set forth in the registration statement. The
omitted information may be obtained at the SEC's principal
office in Washington, D.C. by paying the SEC's prescribed fees.
Experts
The consolidated balance sheets for Kansas City Life at
December 31, 1995 and 1994 and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1995, appearing herein have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included herein in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
Actuarial matters included in this prospectus have been examined
by Mark A. Milton, Vice President and Associate Actuary of Kansas City Life.
Litigation
The Variable Account is not a party to any litigation. Its
depositor, Kansas City Life, as an insurance company, ordinarily
is involved in litigation. Kansas City Life is of the opinion
that such litigation is not material to the Contract Owners of
the Variable Account.
Legal Matters
Sutherland, Asbill & Brennan of Washington, D.C. has provided
advice on certain matters relating to the federal securities
laws. Matters of Missouri law pertaining to the Contracts,
including Kansas City Life's right to issue the Contracts and
its qualification to do so under applicable laws and regulations
issued thereunder, have been passed upon by C. John Malacarne,
General Counsel of Kansas City Life.
Financial Statements
Kansas City Life's consolidated balance sheets as of December 31,
1995 and 1994, and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the three years
in the period ended December 31, 1995 appearing herein should be
distinguished from financial statements of the Variable Account and
should be considered only as bearing upon Kansas City Life's ability
to meet its obligations under the Contracts. They should not be considered
as bearing on the investment performance of the assets held in the
Account. No financial statements of the Variable Account are included
herein.
Consolidated Income Statement
(Thousands, except per share data)
1995 1994 1993
Revenues
Insurance revenues:
Premiums:
Life insurance $101 341 103 324 99 941
Accident and health 29 475 30 896 29 988
Contract charges 74 642 69 607 66 900
Investment revenues:
Investment income, net 188 087 173 388 163 237
Realized gains, net 4 950 6 060 24 648
Other 10 290 10 179 9 609
Total revenues 408 785 393 454 394 323
Benefits and Expenses
Policy benefits:
Death benefits 85 388 79 829 72 128
Surrenders of life insurance 16 345 16 490 15 525
Other benefits 53 441 54 146 50 680
Increase in benefit and contract reserves 89 139 83 158 96 188
Amortization of policy acquisition costs 27 992 29 370 22 350
Insurance operating expenses 76 535 73 043 73 990
Interest expense 22 444 926
Total benefits and expenses 348 862 336 480 331 787
Income before Federal income taxes 59 923 56 974 62 536
Federal income taxes:
Current 22 038 22 845 27 772
Deferred (3 853) (4 729) (7 290)
18 185 18 116 20 482
Income before nonrecurring item 41 738 38 858 42 054
Postemployment benefits, net - 1 481 -
Net income $ 41 738 37 377 42 054
Per common share:
Income before nonrecurring item $6.76 6.32 6.84
Postemployment benefits, net - .24 -
Net income $6.76 6.08 6.84
See accompanying Notes to Consolidated Financial Statements.
Consolidated Balance Sheet
1995 1994
Assets
Investments:
Fixed maturities:
Available for sale, at fair value (cost
$1,604,415,000; $1,400,616,000 -1994) $1 647 674 1 309 297
Held to maturity, at amortized cost
(fair value $339,911,000; $398,736,000 -1994) 320 394 395 886
Equity securities available for sale, at fair value
(cost $62,352,000; $77,533,000 -1994) 70 837 82 251
Mortgage loans on real estate, net 235 213 267 695
Real estate, net 48 542 54 976
Real estate joint ventures 36 103 26 120
Policy loans 94 312 95 854
Short-term 36 898 19 340
Total investments 2 489 973 2 251 419
Cash 9 612 7 250
Accrued investment income 40 923 39 480
Receivables, net 7 228 9 088
Property and equipment, net 27 866 28 805
Deferred acquisition costs 192 476 193 667
Value of purchased insurance in force 39 084 40 015
Reinsurance assets 89 983 88 887
Other 6 623 5 142
$2 903 768 2 663 753
Liabilities and Stockholders' Equity
Future policy benefits:
Life insurance $ 658 350 643 672
Accident and health 27 379 26 986
Accumulated contract values 1 518 968 1 459 045
Policy and contract claims 31 919 32 548
Other policyowners' funds:
Dividend and coupon accumulations 42 610 42 737
Other 56 206 52 228
Income taxes:
Current 2 796 538
Deferred 43 230 3 608
Other 65 183 58 696
Total liabilities 2 446 641 2 320 058
Stockholders' equity:
Common stock, par value $2.50 per share
Authorized 18,000,000 shares, issued 9,248,340 shares 23 121 23 121
Paid-in capital 13 039 11 847
Unrealized gains (losses) on securities
available for sale and equity securities, net 29 740 (51 345)
Retained earnings 477 826 446 149
Less treasury stock, at cost
(3,070,435 shares; 3,085,904 shares - 1994) (86 599) (86 077)
Total stockholders' equity 457 127 343 695
$2 903 768 2 663 753
See accompanying Notes to Consolidated Financial Statements.
Consolidated Statement of Equity
1995 1994 1993
Common stock, beginning and end of year $ 23 121 23 121 23 121
Paid-in-capital:
Beginning of year 11 847 10 597 9 342
Excess of proceeds over cost of treasury stock sold 1 192 1 250 1 255
End of year 13 039 11 847 10 597
Unrealized gains (losses) on securities:
Beginning of year (51 345) 13 501 15 298
Unrealized appreciation on cumulative effect
of accounting change, net - 14 627 -
Unrealized appreciation (depreciation) on securities
available for sale, net 81 085 (79 473) (1 797)
End of year 29 740 (51 345) 13 501
Retained earnings:
Beginning of year 446 149 417 381 383 685
Net income 41 738 37 377 42 054
Stockholder dividends of $1.63 per share
($1.40 - 1994 and $1.36 - 1993) (10 061) (8 609) (8 358)
End of year 477 826 446 149 417 381
Treasury stock, at cost:
Beginning of year (86 077) (85 643) (84 258)
Cost of 17,240 shares acquired
(17,329 shares -1994 and 31,594 shares - 1993) (829) (771) (1 661)
Cost of 32,709 shares sold (35,890
shares - 1994 and 29,301 shares - 1993) 307 337 276
End of year (86 599) (86 077) (85 643)
Total stockholders' equity $457 127 343 695 378 957
See accompanying Notes to Consolidated Financial Statements.
Consolidated Statement of Cash Flows
1995 1994 1993
Operating Activities
Net income $ 41 738 37 377 42 054
Adjustments to reconcile net income to
net cash from operating activities:
Amortization of investment discount, net (5 215) (3 882) (5 590)
Depreciation 5 265 5 165 4 638
Policy acquisition costs capitalized (40 388) (43 952) (50 574)
Amortization of deferred policy
acquisition costs 27 992 29 370 22 350
Realized gains (4 950) (6 060) (24 648)
Changes in assets and liabilities:
Future policy benefits 15 071 15 747 22 793
Accumulated contract values 8 135 8 445 19 822
Accrued investment income (1 443) (2 611) (1 705)
Income taxes payable and deferred (1 595) (4 784) (12 295)
Postemployment benefits, net - 1 481 -
Other, net 9 613 5 456 6 166
Net cash from operating activities 54 223 41 752 23 011
Investing Activities
Investments called, matured or repaid:
Fixed maturities available for sale 136 574 203 640 -
Fixed maturities held to maturity 63 433 75 060 809 347
Equity securities available for sale 13 727 27 876 55 026
Mortgage loans on real estate 67 722 35 311 49 151
Decrease in policy loans, net 1 542 1 929 4 927
Other 3 342 540 2 899
Investments sold:
Fixed maturities available for sale 165 563 51 124 -
Fixed maturities held to maturity 4 207 - 206 923
Equity securities available for sale 18 984 3 488 36 236
Investments purchased or originated:
Fixed maturities available for sale (495 766) (574 667) -
Fixed maturities held to maturity - (21 533) (1 221 873)
Equity securities available for sale (12 896) (5 566) (25 425)
Real estate joint ventures (8 093) (5 707) (10 661)
Mortgage loans on real estate (31 053) (8 192) (6 468)
Decrease (increase) in short-term
investments, net (17 558) 120 142 29 425
Other (1 068) (1 789) (5 762)
Net additions to property and equipment (2 918) (1 640) (11 370)
Net cash used in investing activities (94 258) (99 984) (87 625)
Financing Activities
Proceeds from borrowings 22 730 891 2 586
Repayment of borrowings (22 730) (11 446) (27 994)
Policyowner contract deposits 179 135 179 411 167 979
Withdrawals of policyowner contract deposits (127 347) (107 354) (70 258)
Cash dividends to stockholders (10 061) (8 609) (8 358)
Disposition (acquisition)
of treasury stock, net 670 816 (130)
Net cash from financing activities 42 397 53 709 63 825
Increase (decrease) in cash 2 362 (4 523) (789)
Cash at beginning of year 7 250 11 773 12 562
Cash at end of year $ 9 612 7 250 11 773
See accompanying Notes to Consolidated Financial Statements.
Notes to Consolidated Financial Statements
(Amounts in tables are generally stated in thousands, except per share data)
Significant Accounting Policies
Organization
Kansas City Life Insurance Company is a Missouri-domiciled stock life insurance
company which, with its affiliates, is licensed to sell insurance products in 48
states and the District of Columbia. The Company offers a diversified
portfolio of individual insurance, annuity and group products distributed
through numerous general agencies. In recent years, the Company's new business
activities have been concentrated in interest sensitive products.
Basis of Presentation
The accompanying consolidated financial statements have been prepared on the
basis of generally accepted accounting principles (GAAP) and include the
accounts of Kansas City Life Insurance Company and its subsidiaries.
Significant intercompany transactions have been eliminated in consolidation.
Certain reclassifications have been made to prior year results to conform with
the current year's presentation. GAAP requires management to make certain
estimates and assumptions which effect amounts reported in the financial
statements and accompanying notes. Actual results could differ from these
estimates.
Recognition of Revenues
Traditional life insurance products include whole life insurance, term life
insurance and certain annuities. Premiums for these products are recognized as
revenues when due. Accident and health insurance premiums are recognized as
revenues over the terms of the policies. Universal life-type products include
universal life insurance and flexible annuities. Revenues for these products are
amounts assessed against contract values for cost of insurance, policy
administration and surrenders, as well as amortization of deferred front-end
contract charges.
Future Policy Benefits
For traditional life insurance products, reserves have been computed by a net
level premium method based upon estimates at the time of issue for investment
yields, mortality and withdrawals. These estimates include provisions for
experience less favorable than actually expected. Investment yield assumptions
for new issues are graded and range from 5.75 percent to 7.75 percent.
Mortality assumptions are based on standard mortality tables. The 1965-70 Select
and Ultimate Basic Table is used for business issued since 1977.
Reserves and claim liabilities for accident and health insurance include
estimated unpaid claims and claims incurred but not reported. For traditional
life and accident and health insurance, benefits and claims are charged to
expense in the period incurred.
Liabilities for universal life-type products represent accumulated contract
values, without reduction for potential surrender charges, and deferred front-
end contract charges which are amortized over the term of the policies.
Benefits and claims are charged to expense in the period incurred net of related
accumulated contract values. Interest on accumulated contract values is credited
to contracts as earned. Crediting rates for universal life insurance and
flexible annuity products ranged from 4.79 percent to 7.00 percent during 1995
(4.50 percent to 7.50 percent during 1994 and 4.50 percent to 8.00 percent
during 1993).
Withdrawal assumptions for all products are based on corporate experience.
Policy Acquisition Costs
The costs of acquiring new business, principally commissions, certain policy
issue and underwriting expenses and certain variable agency expenses, are
deferred. For traditional life products, deferred acquisition costs are
amortized in proportion to premium revenues over the premium-paying period of
related policies, using assumptions consistent with those used in computing
benefit reserves. Acquisition costs for universal life-type products are
amortized over a period not exceeding 30 years in proportion to estimated
gross profits arising from interest spreads and mortality, expense and surrender
charges expected to be realized over the term of the contracts.
Calls in the securities portfolio resulted in realized gains in 1994 and 1993
which increased gross profits above those originally estimated. Calls and
realized gains related to them were negligible in 1995. In accordance with
Financial Accounting Standards Board (FASB) Statement No. 97, these higher than
expected gross profits required the Company to recompute its amortization of
deferred acquisition costs retrospectively to the date the amortization was
originally determined. This increased the amortization of deferred acquisition
costs $804,000 in 1994 and $3,030,000 in 1993, or $.08 a share in 1994 and $.32
a share in 1993 after taxes. This increased amortization was netted against
realized investment gains in the accompanying income statement.
Value of Purchased Insurance in Force
The value of Old American's purchased insurance in force was capitalized and is
being amortized in proportion to projected future gross profits. This asset was
increased $5,157,000 ($5,310,000 - 1994 and $5,513,000 - 1993) for accrual of
interest and reduced $6,088,000 ($6,636,000 -1994 and $7,217,000 - 1993) for
amortization. A 13 percent interest rate was used. Through 1995, total
accumulated accrual of interest and amortization equal $22,553,000 and
$26,969,000, respectively. The percentage of the asset's current carrying amount
which will be amortized in each of the next five years is 2.7 percent - 1996,
7.1 percent - 1997 and 1998, 7.2 percent - 1999 and 7.4 percent - 2000.
Investments
Securities held to maturity and short-term investments are stated at cost
adjusted for amortization of premium and accrual of discount. Securities
available for sale are stated at fair value. Unrealized gains and losses on
securities available for sale are reduced by deferred income taxes and related
adjustments in deferred acquisition costs, and are included in a separate
stockholders' equity account.
Mortgage loans are stated at cost adjusted for amortization of premium and
accrual of discount less an allowance for possible losses. Foreclosed real
estate is stated at fair value at the date of foreclosure (cost) or net
realizable value, whichever is lower. Other real estate investments are carried
at depreciated cost. Real estate joint ventures are valued at cost adjusted for
the Company's equity in earnings since acquisition. Policy loans are carried at
cost less payments received. Realized gains and losses on disposals of
investments, determined by the specific identification method, are included in
investment revenues.
Federal Income Taxes
Income taxes have been provided using the liability method in accordance with
FASB Statement No. 109, "Accounting for Income Taxes." Under that method,
deferred tax assets and liabilities are determined based on the differences
between their financial reporting and their tax bases and are measured using the
enacted tax rates.
Income Per Common Share
Income per common share is based upon the weighted average number of shares
outstanding during the year, 6,173,294 shares (6,152,155 shares - 1994 and
6,146,583 shares - 1993).
Statutory Information and Stockholder Dividends Restriction
The Company's earnings, unassigned surplus (retained earnings and stockholders'
equity, on the statutory basis used to report to regulatory authorities, follow.
1995 1994 1993
Net gain from operations for the year $ 29 307 29 151 20 685
Net income for the year 29 484 28 324 24 035
Unassigned surplus at December 31 268 239 235 226 202 538
Stockholders' equity at December 31 217 801 184 117 150 613
Stockholder dividends may not exceed statutory unassigned surplus.
Additionally, under Missouri law, the Company must have the prior approval of
the Missouri Director of Insurance in order to pay a dividend exceeding the
greater of statutory net gain from operations for the preceding year or 10
percent of statutory stockholders' equity at the end of the preceding year.
The maximum payable in 1996 without prior approval is $29,307,000. The Company
believes these statutory limitations impose no practical restrictions on its
dividend payment plans.
The Company is required to deposit a defined amount of assets with state
regulatory authorities. Such assets had an aggregate carrying value of
approximately $100,000,000 in 1995 and 1994.
Investments
Accounting Change
Kansas City Life adopted FASB Statement No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," on January 1, 1994, and classified
73 percent of its securities as available for sale, with the balance
classified as held to maturity. Prior to 1994 fixed maturities were carried at
amortized cost and equity securities were carried at their market value.
Valuing securities available for sale at market increased stockholders' equity
$14,627,000 at January 1, 1994, net of related deferred acquisition costs of
$5,068,000 and taxes of $7,876,000.
Late in 1995, the FASB issued a special report, "A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities". This report provides companies with an opportunity for a one-time
reassessment and reclassification of securities as of a single measurement date
without tainting the held to maturity debt securities classification. On
December 31, 1995, the Company reclassified securities with an amortized cost of
$14,737,000 from held to maturity to available for sale which increased
unrealized gains on securities by approximately $185,000, net of related
deferred acquisition costs and taxes.
Currently 84 percent of the Company's securities are categorized as available
for sale and are valued at market. The resulting adjustment causes significant
volatility in these securities' carrying values which affects various
calculations that are dependent on stockholders' equity, such as return on
equity.
Kansas City Life employs no derivative financial instruments.
Investment Revenues
Major categories of investment revenues are summarized as follows.
1995 1994 1993
Investment Income:
Fixed maturities $144 242 127 806 107 880
Equity securities 6 259 7 563 11 971
Mortgage loans 31 378 29 118 33 337
Real estate 12 342 11 732 10 106
Policy loans 6 174 6 295 6 524
Short-term 2 753 4 437 8 192
Other 2 533 2 433 1 785
205 681 189 384 179 795
Less investment expenses (17 594) (15 996) (16 558)
$188 087 173 388 163 237
Realized Gains (Losses):
Fixed maturities $ (1 718) 1 995 19 087
Equity securities 4 634 4 568 11 433
Mortgage loans (108) - (3 500)
Real estate 2 172 300 875
Other (30) 1 (217)
Deferred acquisition cost
amortization for realized gains - (804) (3 030)
$ 4 950 6 060 24 648
Unrealized Gains and Losses
Unrealized gains (losses) on the Company's securities follow. Held to maturity
and available for sale securities relate to 1995 and 1994, while fixed
maturities relate only to 1993.
1995 1994 1993
Held to maturity and fixed maturities $ 19 517 2 850 68 670
Available for sale and equity securities $ 51 744 (86 601) 20 771
Deferred income taxes (16 013) 27 661 (7 270)
Effect on deferred acquisition costs (5 991) 7 595 -
$ 29 740 (51 345) 13 501
Increase (decrease) in
net unrealized gains:
Held to maturity and fixed maturities $ 16 667 (65 820) (7 478)
Available for sale fixed maturities $ 78 876 (55 150) -
Available for sale equity securities 2 209 (9 696) (1 797)
$ 81 085 (64 846) (1 797)
Securities
The amortized cost and fair value of investments in securities at December 31,
1995, follow.
Gross
Amortized Unrealized Fair
Cost Gains Losses Value
Available for sale:
U.S. government bonds $ 138 372 3 479 253 141 599
Public utility bonds 279 156 7 641 1 612 285 185
Corporate bonds 865 960 29 744 3 609 892 094
Mortgage-backed bonds 242 187 9 350 261 251 276
Other bonds 65 230 609 1 672 64 168
Redeemable preferred stocks 13 510 632 790 13 352
Total fixed maturities 1 604 415 51 455 8 197 1 647 674
Equity securities 62 352 9 345 859 70 837
1 666 767 60 800 9 056 1 718 511
Held to maturity:
Public utility bonds 175 700 13 023 114 188 608
Corporate bonds 138 727 6 969 863 144 834
Other bonds 5 967 511 9 6 469
320 394 20 503 986 339 911
$1 987 161 81 303 10 042 2 058 422
The amortized cost and fair value of investments in fixed maturity and equity
securities at December 31, 1994, follow.
Gross
Amortized Unrealized Fair
Cost Gains Losses Value
Available for sale:
U.S. government bonds $ 137 522 567 3 268 134 821
Public utility bonds 305 749 439 21 837 284 351
Corporate bonds 583 648 684 47 437 536 895
Mortgage-backed bonds 263 824 2 683 14 445 252 062
Other bonds 84 687 268 8 323 76 632
Redeemable preferred stocks 25 186 495 1 145 24 536
Total fixed maturities 1 400 616 5 136 96 455 1 309 297
Equity securities 77 533 6 846 2 128 82 251
$1 478 149 11 982 98 583 1 391 548
Held to maturity:
Public utility bonds $203 747 10 079 1 644 212 182
Corporate bonds 174 879 3 285 8 899 169 265
Other bonds 17 260 397 368 17 289
395 886 13 761 10 911 398 736
$1 874 035 25 743 109 494 1 790 284
All fixed maturity securities produced income in 1995.
The distribution of the fixed maturity securities' contractual maturities
follows. However, expected maturities may differ from these contractual
maturities since borrowers may have the right to call or prepay obligations.
Amortized Fair
Cost Value
Available for sale:
Due in one year or less $ 32 075 32 267
Due after one year through five years 329 480 334 365
Due after five years through ten years 650 309 663 764
Due after ten years 350 364 366 002
Mortgage-backed bonds 242 187 251 276
$1 604 415 1 647 674
Held to maturity:
Due in one year or less $ 48 608 49 527
Due after one year through five years 137 623 148 560
Due after five years through ten years 61 102 65 602
Due after ten years 73 061 76 222
$ 320 394 339 911
Sales of investments in securities available for sale in 1995 and 1994 and fixed
maturity securities in 1993, excluding normal maturities and calls, follow.
1995 1994 1993
Proceeds $184 547 54 612 206 923
Gross realized gains 6 416 1 065 2 480
Gross realized losses 6 527 377 241
During 1995, the Company sold a held to maturity security with an amortized cost
of $4,284,000, resulting in a realized investment loss of $77,000, due to a
perceived significant deterioration in the issuer's credit worthiness.
At December 31, 1995, the Company does not hold securities of any corporation
and its affiliates which exceeded 10 percent of stockholders' equity.
Mortgage Loans
The Company holds non-income producing mortgage loans equaling $2,862,000
($3,040,000 - 1994). Mortgage loans are carried net of a valuation reserve of
$10,500,000 in 1995 and 1994.
At December 31, 1995 and 1994, the mortgage portfolio is diversified
geographically and by property type as follows.
1995 1994
Carrying Fair Carrying Fair
Amount Value Amount Value
Geographic Region:
Mountain $ 78 843 82 753 102 673 101 589
Pacific 80 334 82 802 84 617 84 509
West South Central 35 541 37 483 38 573 38 252
West North Central 28 172 29 717 28 272 27 778
Other 22 823 24 233 24 060 23 571
Valuation reserve (10 500) (10 500) (10 500) (10 500)
$235 213 246 488 267 695 265 199
Property Type:
Industrial $104 728 109 247 111 946 111 608
Retail 57 246 60 114 64 464 63 631
Office 66 404 69 656 62 496 62 117
Other 17 335 17 971 39 289 38 343
Valuation reserve (10 500) (10 500) (10 500) (10 500)
$235 213 246 488 267 695 265 199
As of December 31, 1995, the Company has commitments which expire in 1996 to
originate mortgage loans of $2,550,000.
Mortgage loans foreclosed upon and transferred to real estate investments during
the year equaled $4,322,000 ($3,391,000 - 1994 and $4,466,000 - 1993).
Real Estate
Detail concerning the Company's real estate investments follows.
1995 1994
Penntower office building, at cost:
Land $ 1 106 1 106
Building 17 543 17 254
Less accumulated depreciation (8 721) (8 134)
Foreclosed real estate, at lower of
cost or net realizable value 22 736 28 904
Other investment properties, at cost:
Land 3 370 3 560
Buildings 24 890 23 875
Less accumulated depreciation (12 382) (11 589)
$ 48 542 54 976
Investment real estate, other than foreclosed properties, is depreciated on a
straight-line basis. Penntower office building is depreciated over 60 years and
all other properties from 10 to 35 years. Foreclosed real estate is carried net
of a valuation allowance of $7,378,000 ($9,942,000 - 1994) to reflect net
realizable value.
The Company held non-income producing real estate equaling $931,000 in 1995 and
1994.
Postretirement Benefit Plans
The Company has defined benefit postretirement plans providing medical benefits
for substantially all its employees, full-time agents, and their dependents, and
life insurance coverage for its employees. The Company and retirees share the
cost of the postretirement medical plan which incorporates cost-sharing
features such as annually adjusted contributions, deductibles and coinsurance.
The medical benefits for agents are contributory, incorporating cost-sharing
features similar to the retired employees' medical plan. The life insurance
benefit is non-contributory. The Company pays the cost of the postretirement
health care benefits as they occur. The Company makes level annual contributions
to its life insurance plan over the plan participants' expected service periods.
The plans' funded status, reconciled with the amounts recognized in the
Company's balance sheet, follows.
1995 1994
Life Life
Medical Insurance MedicaI Insurance
Plans Plan Plans Plan
Accumulated postretirement
benefit obligation:
Retirees $ 5 170 2 063 4 172 1 923
Fully eligible active
plan participants 1 358 422 796 306
Other active plan participants 5 058 786 3 105 537
11 586 3 271 8 073 2 766
Unrecognized net gain (loss) (679) (43) 2 298 306
$10 907 3 228 10 371 3 072
The net periodic postretirement benefit cost included the following components
by plan.
1995 1994 1993
Medical plans:
Service cost $ 274 305 434
Interest cost 669 535 658
Net amortization of experience gains (93) (87) -
$ 850 753 1 092
Life insurance plan:
Service cost $ 40 74 81
Interest cost - - -
$ 40 74 81
The weighted average annual assumed rate of increase in the per capita cost of
covered benefits for the medical plans is 12 percent for 1996, the same as for
1995, and is assumed to decrease gradually to 6 percent in 2004. Increasing the
assumed health care cost growth rates by one percentage point increases the
accrued postretirement benefit costs $1,931,000 and $1,119,000 as of December
31, 1995 and 1994, respectively. The aggregate service and interest cost
components of the net periodic postretirement benefit cost for 1995 would
increase $268,000. The weighted average discount rate used in determining
the accumulated postretirement benefit obligation was 7.0 percent and 8.5
percent at December 31, 1995 and 1994, respectively.
Employee Benefit Plans
The Company has a defined benefit pension plan covering substantially all its
employees. The benefits are based on years of service and the employee's
compensation during the last five years of employment. The Company annually
funds an amount greater than the minimum required by ERISA but no more than the
maximum deductible for Federal income tax purposes. Contributions provide not
only for benefits attributed to service to date, but also for those expected to
be earned in the future. The table below states the plan's funded status and
those amounts recognized in the Company's financial statements.
1995 1994
Actuarial present value of
accumulated benefit obligation, including vested
benefits of $80,212,000 ($63,829,000 - 1994) $81 769 64 979
Projected benefit obligation for service
rendered to date $96 771 74 093
Plan assets at fair value, primarily
listed corporate and U.S. bonds 85 710 74 098
Plan assets in excess of (less than)
projected benefit obligation (11 061) 5
Items not yet recognized in earnings:
Net loss from past experience 13 885 3 733
Prior service costs 16 18
Net asset at January 1, 1987,
being recognized over 16 years (1 442) (1 648)
Net prepaid pension costs $ 1 398 2 108
1995 1994 1993
Net pension cost includes:
Service costs - benefits earned during the period $ 2 403 3 178 3 156
Interest cost on projected benefit obligation 6 156 5 835 5 367
Actual return on plan assets (14 139) 1 907 (7 631)
Net amortization and deferral 7 412 (8 923) 1 047
Net periodic pension cost $ 1 832 1 997 1 939
Assumptions were as follows:
Weighted average discount rate 7.0% 8.5 7.0
Weighted average compensation increase 5.5 5.5 5.5
Weighted average expected
long-term return on plan assets 9.0 9.0 9.0
The Company made no pension contributions in 1993 and 1994. Contributions for
1995 were $992,000.
Non-contributory defined contribution retirement plans are offered for general
agents and eligible sales agents which provide supplemental payments based upon
earned agency first-year individual life and annuity commissions. Contributions
to these plans were $287,000 ($111,000 - 1994 and $114,000 - 1993). The Company
also sponsors a non-contributory deferred compensation plan for eligible
agents based upon earned first-year commissions. Contributions to this plan were
$405,000 ($377,000 - 1994 and $370,000 - 1993).
Savings plans for eligible employees and agents are sponsored in which the
Company matches employee contributions up to 10 percent of salary and agent
contributions up to 2.5 percent of prior year paid commissions. Contributions to
the plans were $1,826,000 ($1,898,000 - 1994 and $1,839,000 - 1993).
The Company also has a non-contributory trusteed employee stock ownership plan
covering substantially all salaried employees. The Company made no contributions
to this plan between 1993 and 1995.
Kansas City Life adopted FASB Statement No. 112, "Employers'Accounting for
Postemployment Benefits," on January 1, 1994. This statement generally requires
the accrual of liabilities for providing benefits, such as severance and
disability, to former or inactive employees whose employment ended before
becoming eligible for retirement. This accounting change resulted in the
immediate recognition of a $1,481,000 transition liability, net of applicable
income taxes, reported as a 1994 nonrecurring expense. Statement No. 112 did not
materially effect 1995 and 1994 operating expenses.
Property and Equipment
1995 1994
Land $ 1 029 1 029
Home office buildings 23 122 23 262
Furniture and equipment 26 382 23 552
50 533 47 843
Less accumulated depreciation (22 667) (19 038)
$27 866 28 805
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method. Home office buildings are depreciated over 25 to 50 years
and furniture and equipment over 3 to 10 years, their estimated useful lives.
Federal Income Taxes
A reconciliation of the Federal income tax rate and the actual tax rate
experienced is shown below.
1995 1994 1993
Federal income tax rate 35 % 35 35
Special tax credits (4) (2) (1)
Other permanent differences (1) (1) (1)
Actual income tax rate 30 % 32 33
Due to a Federal income tax rate change from 34 percent to 35 percent during
1993, the Company had a charge of $900,000 to 1993 earnings. There were no such
tax rate changes in 1994 and 1995.
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are presented below.
1995 1994
Deferred tax assets:
Future policy benefits $ 43 906 41 118
Basis differences between tax and
GAAP accounting for investments - 9 580
Employee retirement benefits 11 598 10 753
Other 3 073 3 286
Gross deferred tax assets 58 577 64 737
Deferred tax liabilities:
Capitalization of policy acquisition
costs, net of amortization 47 321 51 151
Basis differences between tax and
GAAP accounting for investments 38 933 -
Property and equipment, net 2 073 2 167
Value of insurance in force 12 116 12 405
Other 1 364 2 622
Gross deferred tax liabilities 101 807 68 345
Net deferred tax liability $ 43 230 3 608
Federal income taxes paid for the year were $19,981,000 ($22,684,000 - 1994 and
$33,191,000 - 1993).
Policyowners' surplus, which is frozen under the Deficit Reduction Act of 1984,
is $40,500,000 for Kansas City Life, $2,800,000 for Sunset Life and $13,700,000
for Old American. The Companies do not plan to distribute their policyowners'
surplus. Consequently, the possibility of such surplus becoming subject to tax
is remote, and no provision has been made in the financial statements for taxes
thereon. Should the balance in policyowners' surplus become taxable, the tax
computed at current rates would approximate $19,950,000.
Income taxed on a current basis is accumulated in "shareholders' surplus" and
can be distributed to stockholders without tax to the Company. At year-end 1995
this shareholders' surplus was $304,545,000 for Kansas City Life, $59,474,000
for Sunset Life and $31,218,000 for Old American.
Separate Accounts
These accounts arise from the variable line of business. Their assets are
legally segregated and are not subject to the claims which may arise from any
other business of the Company. These assets are reported at fair value since the
underlying investment risks are assumed by the policyowners. Therefore the
related liabilities are recorded at amounts equal to the underlying assets.
Investment income and gains or losses arising from separate accounts accrue
directly to the policyowners and are, therefore, not included in investment
earnings in the accompanying income statement. Revenues to the Company from
separate accounts consist principally of contract maintenance charges,
administrative fees and mortality and risk charges. Separate account assets and
liabilities each equaled $1,264,000
(none - 1994).
Reinsurance
1995 1994 1993
Life Insurance in Force (in millions):
Direct $20 991 19 988 18 990
Ceded (2 442) (2 073) (1 616)
Assumed 33 36 39
Net $18 582 17 951 17 413
Premiums:
Life insurance:
Direct $124 504 126 652 121 577
Ceded (23 292) (23 538) (21 829)
Assumed 129 210 193
Net $101 341 103 324 99 941
Accident and health:
Direct $ 42 971 42 709 41 529
Ceded (13 496) (11 956) (11 788)
Assumed - 143 247
Net $ 29 475 30 896 29 988
Contract charges arise generally from directly issued business. Ceded benefit
recoveries were $27,613,000 ($27,365,000 - 1994 and $30,487,000 - 1993).
Old American has a coinsurance agreement with Employers Reassurance Corporation
which reinsures certain whole life policies issued by Old American prior to
December 1, 1986. As of December 31, 1995, these policies had a face value of
$161,855,000. The reserve for future policy benefits ceded under this agreement
was $53,649,000 ($54,686,000 - 1994).
The maximum retention on any one life is $350,000. A contingent liability exists
with respect to reinsurance, which may become a liability of the Company in the
unlikely event that the reinsurers should be unable to meet obligations assumed
under reinsurance contracts.
Fair Value of Financial Instruments
The carrying amounts for cash, short-term investments and policy loans as
reported in the accompanying balance sheet approximate their fair values. The
fair values for securities held to maturity are based on quoted market prices,
where available. For those securities not actively traded, fair values are
estimated using values obtained from independent pricing services or, in
the case of private placements, are estimated by discounting expected future
cash flows using a current market rate applicable to the yield, credit quality
and maturity of the investments. The fair values for securities available for
sale are based on quoted market prices. Fair values for mortgage loans are based
upon discounted cash flow analyses using an interest rate assumption of 2
percent above the comparable U.S. Treasury rate.
Fair values for the Company's liabilities under investment-type insurance
contracts, included with accumulated contract values for flexible annuities and
with other policyholder funds for supplementary contracts without life
contingencies, are estimated to be their cash surrender values.
Fair values for the Company's insurance contracts other than investment
contracts are not required to be disclosed. However, the fair values of
liabilities under all insurance contracts are taken into consideration in the
Company's overall management of interest rate risk, which minimizes exposure to
changing interest rates through the matching of investment maturities with
amounts due under insurance contracts.
The carrying amounts and fair values of the financial instruments follow.
1995 1994
Carrying Fair Carrying Fair
Amount Value Amount Value
Investments:
Securities available for sale $1 718 511 1 718 511 1 391 548 1 391 548
Securities held to maturity 320 394 339 911 395 886 398 736
Mortgage loans 235 213 246 488 267 695 265 199
Liabilities:
Individual and group annuities 871 340 842 809 851 847 822 946
Supplementary contracts without
life contingencies 23 343 23 343 22 403 22 403
The Investments Note provides further details regarding the investments above.
Quarterly Consolidated
Financial Data (unaudited)
First Second Third Fourth
1995:
Total revenues $98 733 100 356 103 041 106 655
Operating income $10 960 9 255 8 166 10 140
Realized gains, net 68 27 2 278 844
Net income $11 028 9 282 10 444 10 984
Per common share:
Operating income $ 1.78 1.50 1.32 1.64
Realized gains, net .01 - .37 .14
Net income $ 1.79 1.50 1.69 1.78
1994:
Total revenues $98 478 98 688 98 174 98 114
Operating income $ 8 978 9 381 9 855 6 705
Realized gains, net 1 020 1 504 1 383 32
Income before nonrecurring item 9 998 10 885 11 238 6 737
Postemployment benefits, net 1 481 - - -
Net income $ 8 517 10 885 11 238 6 737
Per common share:
Operating income $ 1.46 1.53 1.60 1.09
Realized gains, net .17 .23 .23 .01
Income before
nonrecurring item 1.63 1.76 1.83 1.10
Postemployment benefits, net .24 - - -
Net income $ 1.39 1.76 1.83 1.10
Contingent Liability
In April 1994, an Oklahoma jury returned a $10.7 million verdict against the
Company, consisting of actual and punitive damages. The case arose out of
certain alleged actions by one of the Company's agents. The Company appealed the
adverse jury verdict citing that the trial court committed numerous errors in
the conduct of the trial, determination of issues of evidence, rulings on
dispositive motions, and in jury instructions. On January 16, 1996, a division
of the Oklahoma Appellate Court issued an opinion affirming a judgment of $1.3
million. While the opinion substantially reduced the jury verdict, the Company
believes this award should be further reduced and has filed a petition for
certiorari with the Oklahoma Supreme Court. It is anticipated that the
plaintiffs will also petition for certiorari to seek reinstatement of the
original verdict. Management believes that damages, if any, related to this
matter would not have a material effect on the Company's consolidated results of
operations and financial position.
In addition to the above case, the Company and certain of its subsidiaries are
defendants in various lawsuits involving claims and disputes with policyowners
that often include claims seeking punitive damages. Some of these lawsuits arise
in jurisdictions such as Alabama where juries sometimes award punitive damages
grossly disproportionate to the actual damages alleged. Although no assurances
can be given and no determinations can be made at this time as to the outcome of
any particular lawsuit or proceeding, the Company and its subsidiaries believe
that there are meritorious defenses for all of these claims and are
defending them vigorously. Management believes that the amounts that would
ultimately be paid, if any, would have no material effect on the Company's
consolidated results of operations and financial position.
To the Board of Directors and Stockholders
of Kansas City Life Insurance Company
We have audited the accompanying consolidated balance sheets of Kansas City Life
Insurance Company (the Company) as of December 31, 1995 and 1994 and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion. In our opinion, the consolidated financial statements referred to above
present fairly, in all material aspects, the consolidated financial position of
Kansas City Life Insurance Company at December 31, 1995 and 1994 and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. As discussed in the Notes to the financial
statements, the Company changed its method of accounting for investments and
postemployment benefits in 1994.
/s/ Ernst & Young LLP
Kansas City, Missouri
January 22, 1996
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
The By-Laws of Kansas City Life Insurance Company provide, in part, in
Article XII:
1. The Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit, or proceeding, whether civil, criminal, administrative or investigative,
other than an action by or in the right of the Company, by reason of the fact
that he or she is or was a Director, Officer or employee of the Company, or is
or was serving at the request of the Company as a Director, Officer or employee
of another company, partnership, joint venture, trust or other enterprise,
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Company, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his or her conduct
was unlawful.
2. The Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the company to procure a judgment in its favor by
reason of the fact that he or she is or was a director, officer or employee of
the company, or is or was serving at the request of the company as a director,
officer or employee of another company, partnership, joint venture, trust or
other enterprise against expenses, including attorneys' fees, actually and
reasonably incurred by him or her in connection with the defense or settlement
of the action or suit if he or she acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
company; except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable
for negligence or misconduct in the performance of his or her duty to the
company unless and only to the extent that the court in which the action or
suit was brought determines upon application that, despite the adjudication of
liability and in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
Missouri law authorizes Missouri corporations to provide indemnification
to directors, officers and other persons.
Kansas City Life owns a directors and officers liability insurance policy
covering liabilities that directors and officers of Kansas City Life and its
subsidiaries and affiliates may incur in acting as directors and officers.
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
REPRESENTATIONS PURSUANT TO RULE 6e-3(T)
This filing is made pursuant to Rule 6e-3(T) under the Investment Company
Act of 1940.
Registrant elects to be governed by Rule 6e-3(T)(b)(13)(i)(A) under the
Investment Company Act of 1940 with respect to the policies described in the
Prospectus.
Registrant makes the following representations:
(1) Rule 6e-3(T)(b)(13)(iii)(F) has been relied upon.
(2) The level of the mortality and expense risk charge is within the
range of industry practice for comparable flexible or scheduled contracts.
(3) Registrant has concluded that there is a reasonable likelihood
that the distribution financing arrangement of the Variable Account will
benefit the Variable Account and Contract Owners and will keep and make
available to the Commission on request a memorandum setting forth the basis for
this representation.
(4) The Variable Account will invest only in management investment
companies which have undertaken to have a board of directors, a majority of
whom are not interested persons of the company, formulate and approve any plan
under Rule 12b-1 to finance distribution expenses.
The methodology used to support the representation made in paragraph (2)
above is based on an analysis of the mortality and expense risk charge
contained in other variable life insurance contracts. Registrant undertakes to
keep and make available to the Commission on request the documents used to
support the representation in paragraph (2) above.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The prospectus consisting of 67 pages.
Undertaking to file reports.
Rule 484 undertaking.
Representations pursuant to Rule 6e-3(T).
The signatures.
Written consents of the following persons:
(a) C. John Malacarne, Esq.
(b) Mark A. Milton, Vice President and Associate Actuary
(c) Sutherland, Asbill & Brennan.
(d) Independent Auditors.
The following exhibits, corresponding to those required by paragraph A of
the instructions as to exhibits in Form N-8B-2:
1.A. (1) Resolutions of the Board of Directors of Kansas City Life Insurance
Company establishing the Kansas City Life Variable Life Separate Account.*
(2) Not applicable.
(3) Distributing Contracts:
(a) Distribution Agreement between Kansas City Life Insurance
Company and Sunset Financial Services, Inc..**
(b) Not applicable.
(c) Schedule of Sales Commissions.***
(4) Not applicable.
(5) (a) Specimen Contract Form.*
(b) Disability Continuance of Insurance Rider.***
(c) Accidental Death Rider.***
(d) Option to Increase Specified Amount Rider.***
(e) Spouse's Term Insurance Rider.***
(f) Children's Term Insurance Rider.***
(g) Other Insured Term Insurance Rider.***
(h) Extra Protection Rider.***
(i) Disability Premium Benefit Rider.***
(j) Temporary Life Insurance Agreement.*
(k) Limited Aviation Rider.***
(l) Unisex Contract Amendment.***
(6) (a) Articles of Incorporation of Bankers Life Association of
Kansas City.*
(b) Restated Articles of Incorporation of Kansas City Life
Insurance Company.*
(c) By-Laws of Kansas City Life Insurance Company.*
(7) Not applicable.
(8) (a) Agreement between Kansas City Life Insurance Company, MFS
Variable Insurance Trust, and Massachusetts Financial Services Company.*
(b) Agreement between Kansas City Life Insurance Company, TCI
Portfolios, Inc. and Investors Research Corporation.*
(c) Agreement between Kansas City Life Insurance Company,
Insurance Management Series, and Federated Securities Corp.*
(9) Not Applicable.
(10) Application Form.*
(11) Memorandum describing issuance, transfer, and redemption procedures.
B. Not applicable.
C. Not applicable.
2. Opinion and consent of C. John Malacarne, Esq., as to the legality of the
securities being registered.
3. Not applicable.
4. Not applicable.
5. Not applicable.
6. Opinion and consent of Mark A. Milton, Vice President and Associate
Actuary, as to actuarial matters pertaining to the securities being registered.
7. (a) Consent of Ernst & Young LLP.
(b) Consent of Sutherland, Asbill & Brennan.
(c) Consent of C. John Malacarne. See Exhibit 2.
8. Undertaking Pursuant to Rule 27d-2 under the Investment Company Act of
1940.
______________________
* Incorporated herein by reference to the Form S-6 Registration Statement
(File No. 33-95354) for Kansas City Life Variable Life Separate Account filed
on August 2, 1995.
** Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Form N-4 Registration Statement (File No. 33-89984) for Kansas City Life
Variable Annuity Separate Account filed on August 25, 1995.
*** Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Form S-6 Registration Statement (File No. 33-95354) for Kansas City Variable
Life Separate Account filed on December 19, 1995.
Registrant, Kansas City Life Variable Life Separate Account, certifies that it
meets all fo the requirements for effectiveness of this Post-Effective
Amendment No. 1 to the Rgistration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective Amendment to be
signed on its behalf by the undersigned thereunto duly authorized, in the City
of Kansas City and the State of Missouri, on the 22nd day of April, 1996.
KANSAS CITY LIFE VARIABLE LIFE
SEPARATE ACCOUNT (Registrant)
By: KANSAS CITY LIFE INSURANCE
COMPANY (Depositor)
Attest: /s/ C. J. Malacarne By: W. E. Bixby
________________
President
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
Kansas City Life Insurance Company has duly caused this Post-Effective
Amendment No. 1 to the Registration Statement to be signed on its behalf
by the undersigned thereunto duly authorized, and its seal to be hereunto
affixed and attested, all in the City of Kansas City and the State of Missouri
on the 22nd day of April, 1996.
Kansas City Life Variable Life Separate Account (Registrant)
By: Kansas City Life Insurance Company (Depositor)
Attest: /s/ C. John Malacarne By:/s/ W. E. Bixby
President
Pursuant to the requirements of the Securities Act of 1933,
Post-Effective Amendment No. 1 to the Registration Statement has been signed
below by the following persons in the capacities indicated on the date(s) set
forth below.
Signature Title Date
/s/ W. E. Bixby Vice Chairman of the Board, April 22, 1996
W. E. Bixby President, CEO, and Director
(Principal Executive Officer)
/s/ Richard L. Finn Senior Vice President, Finance April 22, 1996
Richard L. Finn (Principal Financial Officer)
/s/ John K. Koetting Vice President and Controller April 22, 1996
John K. Koetting (Principal Accounting Officer)
/s/ R. Philip Bixby Senior Vice President, Operations April 22, 1996
R. Philip Bixby and Director
/s/Walter E. Bixby III Director April 22, 1996
W. E. Bixby, III
/s/Richard L. Finn Director April 22, 1996
Richard L. Finn
/s/Daryl D. Jensen Director April 22, 1996
Daryl D. Jensen
/s/ Francis P. Lemery Director April 22, 1996
Francis P. Lemery
/s/ C. John Malacarne Director April 22, 1996
C. John Malacarne
/s/Nancy Bixby Hudson Director April 22, 1996
Nancy Bixby Hudson
/s/David D. Dysart Director April 22, 1996
David D. Dysart
___________________ Director April 22, 1996
Webb R. Gilmore
/s/ Jack D. Hayes Senior Vice President, Marketing April 22, 1996
Jack D. Hayes and Director
/s/ Warren J. Hunzicker Director April 22, 1996
Warren J. Hunzicker, M.D.
/s/Michael J. Ross Director April 22, 1996
Michael J. Ross
/s/E. Larry Winn Jr. Director April 22, 1996
E. Larry Winn Jr.
_____________________ Director April 22, 1996
J.R. Bixby
Exhibit Index List
1.A.(11) Memorandum describing issuance, transfer and redemption
procedures
2. Opinion and consent of C. John Malacarne as to the legality of the
securities being registered
6. Opinion and consent of Mark A. Milton, Vice President and Associate
Actuary, as to actuarial matters pertaining to the securities being
registered
7.(a) Consent of Ernst & Young LLP
7.(b) Consent of Sutherland, Asbill & Brennan
8. Undertaking
APRIL 1996
DESCRIPTION OF ISSUANCE,
TRANSFER AND REDEMPTION PROCEDURES FOR CONTRACTS
PURSUANT TO RULE 6e-3(T)(b)(12)(iii)
FOR FLEXIBLE PREMIUM LIFE INSURANCE CONTRACTS
ISSUED BY
KANSAS CITY LIFE INSURANCE COMPANY
This document sets forth the current administrative procedures that will be
followed by Kansas City Life Insurance Company ("Kansas City Life") in
connection with its issuance of individual flexible premium variable life
insurance contracts (the "Contracts"), the transfer of assets held thereunder,
and the redemption by Contract owners (the "Owners") of their interests in those
Contracts. Capitalized terms used herein have the same meaning as in the
prospectus for the Contract that is included in the current registration
statement on Form S-6 for the Contract as filed with the Securities and Exchange
Commission ("Commission" or "SEC").
I. Procedures Relating to Purchase and Issuance of the Contracts
and Acceptance of Premiums
A. Offer of the Contracts, Applications, Initial Net Premiums, and Issuance
of the Contracts
1. Offer of the Contracts. The Contracts will be offered and
sold for premiums pursuant to established premium schedules and
underwriting standards in accordance with state insurance laws.
Premiums for the Contracts and related insurance charges will
not be the same for all Owners selecting the same Specified
Amount. Insurance is based on the principle of pooling and
distribution of mortality risks, which assumes that each Owner
pays a premium and related insurance charges commensurate with
the Insured's mortality risk as actuarially determined utilizing
factors such as age, sex, health and occupation. A uniform
premium and insurance charges for all Insureds would
discriminate unfairly in favor of those Insureds representing
greater risk. Although there will be no uniform insurance
charges for all Insureds, there will be a uniform insurance rate
for all Insureds of the same risk class. A description of the
Monthly Deduction under the Contract, which includes charges for
cost of insurance and for supplemental benefits, is in Appendix
A to this memorandum.
2. Application. To purchase a Contract, the Owner must
complete an application and submit it through an authorized
Kansas City Life agent. An application will not be deemed to be
complete unless all required information, including without
limitation age, sex, and medical and other background
information, has been provided in the application.
If the applicant is eligible for temporary insurance coverage,
a temporary insurance agreement ("TIA") should also accompany
the application. The TIA provides temporary insurance coverage
prior to the date when all underwriting and other requirements
have been met and the application has been approved, with
certain limitations, as long as an initial premium payment
accompanies the TIA. In accordance with Kansas City Life's
underwriting rules, temporary life insurance coverage may not
exceed $250,000. The TIA may not be in effect for more than 60
days. At the end of the 60 days, the TIA coverage terminates
and the initial premium will be returned to the applicant.
3. Payment of Minimum Initial Premium and Determination of
Contract Date. With the TIA, the applicant must pay an initial
premium payment at the time of application that is at least
equal to two Guaranteed Monthly Premiums (one Guaranteed Monthly
Premium is required for Contracts when premium payments will be
made under a pre-authorized payment arrangement). The minimum
initial premium payment required depends on a number of factors,
such as the age, sex and risk class of the proposed Insured, the
Initial Specified Amount, any supplemental and/or rider benefits
and the Planned Periodic Premium payments the Owner proposes to
make. (See "Planned Periodic Premiums," below.)
In general, policies that are submitted with the required premium
payment (and the premium payment is submitted in "good order")
will have a Contract Date which will be the date of the TIA. However,
if the Contract Date is calculated to be the 29th, 30th or 31st of the
month then the date will be set to the 1st of the next following
month. For Contracts where premium is not accepted at the time
of application or Contracts where values are applied to the new
Contract from another contract, the Contract Date will be the
approval date plus up to two days, unless the approval is the
27th, 28th or 29th of the month in which case then the Contract
Date would be the first of the next month. There are several
exceptions to these rules based on the type of billing, whether
the contract involves a conversion and/or whether the specified
amount exceeds $250,000.
Pre-Authorized Check Payment Plan (PAC) or Combined Billing (CB)--
Premium With Application
If PAC or CB is requested and the initial premium is taken with the
application, the Contract Date will be the later of the TIA date or the
first of the month of approval. Combined Billing is a billing where
more than one Kansas City Life contract is billed together.
Combined Billing (CB)--No Premium With Application
If CB is requested and the initial premium is not taken with
the application, the Contract Date will be the earlier of the 1st
of the month after the Contract is approved or the date the initial
premium is received. However, if approval occurs on the 1st,
2nd, 3rd, 4th or 5th of the month the Contract Date will be the
first of the same month that the Contract is approved. In addition,
if the Contract Date is calculated to be the 29th, 30th, or 31st of
the month then the date will be set to the 1st of the following
month.
Government Allotment (GA) and Federal Allotment (FA)
If GA or FA is requested on the application and an initial premium
is taken with the application, the Contract Date will be the 1st of the
month of approval. If GA or FA is requested and no initial premium
is received the Contract Date will be the first of the month for which
a full monthly allotment is received.
Conversions
If a Kansas City Life term insurance product is converted to a new Contract,
the Contract Date will be the date that the previous contract was paid to.
If there is more than one term policy being converted, the Contract Date will
be determined by the contract with the earliest date that premiums were paid
to.
Specified Amount Exceeds $250,000
If the specified amount requested exceeds $250,000 and an initial premium is
taken with the application, the Contract Date will be the later of the TIA date
or the 1st of the month of approval.
Kansas City Life may specify the form in which
a premium payment must be made in order for the premium to be in
"good order." Ordinarily, a check will be deemed to be in good
order upon receipt, although Kansas City Life may require that
the check first be converted into federal funds. In addition,
for a premium to be received in "good order," it must be
accompanied by all required supporting documentation, in
whatever form required.
An initial premium will not be accepted from applicants that
are not eligible for TIA coverage. Coverage under the Contract
begins on the Contract Date, and Kansas City Life will deduct
Contract charges as of the Contract Date.
The Contract Date is determined by these guidelines except, as
provided for under state insurance law, the Owner may be
permitted to backdate the Contract to preserve insurance age.
In no case may the Contract Date be more than six months prior
to the date the application was completed. Monthly Deductions
will be charged from the Contract Date.
If coverage under an existing Kansas City Life insurance
contract is being replaced, that contract will be terminated and
values will be transferred on the date when all underwriting and
other requirements have been met and the application has been
approved. (For a discussion of underwriting requirements, see
"Underwriting Requirements" below). Kansas City Life will
deduct contract charges as of the Contract Date.
4. Underwriting Requirements. Kansas City Life requires
satisfactory evidence of the proposed Insured's insurability,
which may include a medical examination of the proposed Insured.
The available issue ages are 0 through 80 on a standard
nonsmoker basis, 15 through 80 on a preferred nonsmoker basis,
and 15 through 80 on a smoker basis. Age is determined on the
Insured's age last birthday on the Contract Date. The minimum
Specified Amount is $100,000 for issue ages 0 through 49. The
minimum Specified Amount is $50,000 for issue ages 50 through
80. Acceptance of an application depends on Kansas City Life's
underwriting rules, and Kansas City Life reserves the right to
reject an application.
5. Determination of Owner of the Contract. The Owner of the
Contract may exercise all rights provided under the Contract.
The Insured is the Owner, unless a different Owner is named in
the application. The Owner may by Written Notice name a
contingent Owner or a new Owner while the Insured is living.
Unless a contingent Owner has been named, on the death of the
last surviving Owner, ownership of the Contract passes to the
estate of the last surviving Owner, who will become the Owner if
the Owner dies. The Owner may also be changed prior to the
Insured's death by Written Notice satisfactory to Kansas City
Life.
B. Payment and Acceptance of Additional Premiums
1. Generally. Additional unscheduled premium payments can be
made at any time while the Contract is in force. Kansas City
Life has the right to limit the number and amount of such
premium payments and to require satisfactory evidence of
insurability prior to accepting unscheduled premiums. A loan
repayment must be clearly marked as such or it will be credited
as a premium. No premium payment will be accepted after the
Maturity Date.
2. Procedures for Accepting Additional Premium Payments.
Premium payments must be made by check payable to Kansas City
Life Insurance Company or by any other method that Kansas City
Life deems acceptable. Kansas City Life may specify the form in
which a premium payment must be made in order for the premium to
be in "good order." Ordinarily, a check will be deemed to be in
good order upon receipt, although Kansas City Life may require
that the check first be converted into federal funds. In
addition, for a premium to be received in "good order," it must
be accompanied by all required supporting documentation, in
whatever form required.
Total premiums paid may not exceed premium limitations for
life insurance set forth in the Internal Revenue Code. Kansas
City Life will monitor Contracts and will notify the Owner if a
premium payment exceeds this limit and will cause the Contract
to violate the definition of insurance. The Owner may choose to
take a refund of the portion of the premium payment that is
determined to be in excess of applicable limitations, or the
Owner may submit an application to modify the Contract so it
continues to qualify as a contract for life insurance.
Modifying the Contract may require evidence of insurability.
(See "Underwriting Requirements" above.) Kansas City Life will
monitor Contracts and will attempt to notify the Owner on a
timely basis if premiums paid under a Contract exceed the "7-Pay
Test" as set forth in the Internal Revenue Code and, therefore,
the Contract is in jeopardy of becoming a modified endowment
contract.
3. Planned Periodic Premiums. When applying for a Contract,
the Owner selects a plan for paying level premium payments at
specified intervals, e.g., semi-annually or annually. If the
Owner elects, Kansas City Life will also arrange for payment of
Planned Periodic Premiums on a monthly or quarterly basis under
a pre-authorized payment arrangement. The Owner is not required
to pay premium payments in accordance with these plans; rather,
the Owner can pay more or less than planned or skip a Planned
Periodic Premium entirely. Each premium after the initial
premium must be at least $25. Kansas City Life may increase
this minimum limit 90 days after sending the Owner a Written
Notice of such increase. Subject to the limits described above,
the Owner can change the amount and frequency of Planned
Periodic Premiums by sending Written Notice to the Home Office.
Kansas City Life, however, reserves the right to limit the
amount of a premium payment or the total premium payments paid,
as discussed above.
4. Guaranteed Payment Period and Guaranteed Monthly Premium.
A Guaranteed Payment Period is the period during which Kansas
City Life guarantees that the Contract will not lapse if the
amount of total premiums paid is greater than or equal to the
sum of: (1) the accumulated Guaranteed Monthly Premiums in
effect on each prior Monthly Anniversary Day, and (2) an amount
equal to the sum of any partial surrenders taken and
Indebtedness under the Contract. The Guaranteed Payment Periods
are five years following the Contract Date and five years
following the effective date of an increase in the Specified
Amount.
The Guaranteed Monthly Premium is shown in the Contract. The
per $1,000 Guaranteed Monthly Premium factors for the Specified
Amount vary by risk class, issue age, and sex. Additional
premiums for substandard ratings and supplemental and/or rider
benefits are included in the Guaranteed Monthly Premium.
However, upon a change to the Contract, Kansas City Life will
recalculate the Guaranteed Monthly Premium and will notify the
Owner of the new Guaranteed Monthly Premium and amend the
Owner's Contract to reflect the change.
5. Premium Payments Upon Increase in Specified Amount. A new Guaranteed
Payment Period begins on the effective date of an
increase in Specified Amount. The Owner will be notified of the
new Guaranteed Monthly Premium for this period. Depending on
the Contract Value at the time of an increase in the Specified
Amount and the amount of the increase requested, an additional
premium payment may be necessary or a change in the amount of
Planned Periodic Premiums may be advisable.
6. Premium Payments to Prevent Lapse. Failure to pay Planned Periodic
Premiums will not necessarily cause a Contract to
lapse. Conversely, paying all Planned Periodic Premiums will
not guarantee that a Contract will not lapse. The conditions
that will result in the Owner's Contract lapsing will vary, as
follows, depending on whether a Guaranteed Payment Period is in
effect.
a. During the Guaranteed Payment Period. A grace period starts if on any
Monthly Anniversary Day the Cash Surrender
Value is less than the amount of the Monthly Deduction and the
accumulated premiums paid as of the Monthly Anniversary Day are
less than required to guarantee the Contract will not lapse
during the Guaranteed Payment Period. The premium required to
keep the Contract in force will be an amount equal to the lesser
of: (1) the amount to guarantee the Contract will not lapse
during the Guaranteed Payment Period less the accumulated
premiums paid; and (2) an amount sufficient to provide a cash
surrender value equal to three Monthly Deductions.
b. After the Guaranteed Payment Period. A grace period starts if the Cash
Surrender Value on a Monthly Anniversary Day
will not cover the Monthly Deduction. A premium sufficient to
provide a cash surrender value equal to three Monthly Deductions
must be paid during the grace period to keep the Contract in force.
7. Grace Period. The grace period is a 61-day period to make
a premium payment sufficient to prevent lapse. Kansas City Life
will send notice of the amount required to be paid during the
grace period to the Owner's last known address and the address
of any assignee of record. The grace period will begin when the
notice is sent. The Owner's Contract will remain in force
during the grace period. If the Insured should die during the
grace period, the Death Benefit proceeds will still be payable
to the Beneficiary, although the amount paid will reflect a
reduction for the Monthly Deductions due on or before the date
of the Insured's death (and for any Indebtedness). If the grace
period premium payment has not been paid before the grace period
ends, the Owner's Contract will lapse. It will have no value
and no benefits will be payable.
A grace period also may begin if Indebtedness becomes excessive.
C. Allocation and Crediting of Initial and Additional Premiums
1. The Separate Account, Subaccounts, and Fixed Account. The variable
benefits under the Contracts are supported by the
Kansas City Life Variable Life Separate Account (the "Variable
Account"). The Variable Account currently consists of eleven
Subaccounts, the assets of which are used to purchase shares of
a designated corresponding mutual fund Portfolio that is part of
one of the following Funds: MFS Variable Insurance Trust ("MFS
Trust"), TCI Portfolios, Inc. ("TCI Portfolios"), and Federated
Insurance Series. Each Fund is registered under the
Investment Company Act of 1940 as an open-end management
investment company. Owners also may allocate Contract Value to
Kansas City Life's general account (the "Fixed Account").
Additional Subaccounts may be added from time to time to invest
in portfolios of MFS Trust, TCI Portfolios, and Federated Insurance
Series, or any other investment company.
2. Allocations Among the Accounts. Net Premiums and Contract
Value are allocated to the Subaccounts and the Fixed Account in
accordance with the following procedures.
a. General. In the Contract application, the Owner specifies the
percentage of a Net Premium to be allocated to each
Subaccount and to the Fixed Account. The sum of the allocations
must equal 100%, and Kansas City Life reserves the right to
limit the number of Subaccounts to which premiums may be
allocated. The Owner can change the allocation percentages at
any time, subject to these rules, by sending Written Notice to
the Home Office. The change will apply to premium payments
received with or after receipt of that Written Notice.
b. Allocation of Initial Premium. On the Allocation Date, the initial Net
Premium will be allocated to the Money Market
Subaccount. The Allocation Date is the later of the date when
all underwriting and other requirements have been met and an
application has been approved, or the date the initial premium
is received in good order at the Home Office. Kansas City Life
may specify the form in which a premium payment must be made in
order for the premium to be in "good order." Ordinarily, a
check will be deemed to be in good order upon receipt, although
Kansas City Life may require that the check first be converted
into federal funds. In addition, for a premium to be received
in "good order," it must be accompanied by all required
supporting documentation, in whatever form required. If any
additional premiums are received in good order before the
Reallocation Date (as defined below), the corresponding Net
Premiums also will be allocated to the Money Market Subaccount.
The "free-look" period under the Contract is assumed to end
on the Reallocation Date, and on that date, Contract Value in
the Money Market Subaccount will be allocated to the Subaccounts
and to the Fixed Account based on the Net Premium allocation
percentages specified in the application. The Reallocation Date
is 30 days after the Allocation Date.
c. Allocation of Additional Premiums. Premiums received on or after the
Reallocation Date will be credited to the Contract
and the Net Premiums will be invested as requested on the
Valuation Day they are received at Kansas City Life's Home
Office, except if additional underwriting is required. Premium
payments requiring additional underwriting will not be credited
to the Contract until underwriting has been completed and the
premium payment has been accepted. (See "Underwriting
Requirements" above). If the additional premium payment is
rejected, Kansas City Life will return the premium payment
immediately, without any adjustment for investment experience.
II. Transfers Among Accounts
A. Transfer Privilege
1. General. After the Reallocation Date and prior to the
Maturity Date, the Owner may transfer all or part of an amount
in the Subaccount(s) to another Subaccount(s) or to the Fixed
Account, or transfer a part of an amount in the Fixed Account to
the Subaccount(s), subject to the restrictions described below.
Kansas City Life will make the transfer on the date that it
receives Written Notice requesting such transfer.
2. General Restrictions on Transfer Privilege. The minimum
transfer amount is the lesser of $250 or the entire amount in
that Subaccount or the Fixed Account. A transfer request that
would reduce the amount in a Subaccount or the Fixed Account
below $250 will be treated as a transfer request for the entire
amount in that Subaccount or the Fixed Account.
There is no limit on the number of transfers that can be made
among Subaccounts or to the Fixed Account. However, only one
transfer may be made from the Fixed Account each Contract Year.
(For a description of those restrictions, see "Restrictions on
Transfers from Fixed Account," below.) The first six transfers
during each Contract Year are free. Any unused free transfers
do not carry over to the next Contract Year. Kansas City Life
will assess a $25 Transfer Processing Fee for the seventh and
each subsequent transfer during a Contract Year. For the
purpose of assessing the fee, each Written Request (or telephone
request described below) is considered to be one transfer,
regardless of the number of Subaccounts or the Fixed Account
affected by the transfer. The processing fee will be deducted
from the amount being transferred or from the remaining Contract
Value, according to the Owner's instructions.
3. Restrictions on Transfers from Fixed Account. One transfer
each Contract Year is allowed from the Fixed Account to any or
all of the Subaccounts. The amount transferred from the Fixed
Account may not exceed 25% of the unloaned Fixed Account Value
on the date of transfer, unless the balance after the transfer
is less than $250, in which case Kansas City Life will transfer
the entire amount.
B. Telephone Transfers
1. Election of the Program. Telephone transfers will be based
upon instructions given by telephone, provided the appropriate
election has been made at the time of application or proper
authorization has been provided to Kansas City Life. Kansas
City Life reserves the right to suspend telephone transfer
privileges at any time, for any reason, if it deems such
suspension to be in the best interests of Contract Owners.
2. Procedures Employed to Confirm Genuineness of Telephone
Transfer Instructions. Kansas City Life will employ reasonable
procedures to confirm that instructions communicated by
telephone are genuine, and if Kansas City Life follows those
procedures it will not be liable for any losses due to
unauthorized or fraudulent instructions. Kansas City Life may
be liable for such losses if it does not follow those reasonable
procedures. The procedures Kansas City Life will follow for
telephone transfers include requiring some form of personal
identification prior to acting on instructions received by
telephone, providing written confirmation of the transaction,
and making a tape recording of the instructions given by
telephone.
C. Dollar Cost Averaging Plan
1. General. The Dollar Cost Averaging Plan, if elected,
enables the Owner to transfer systematically and automatically,
on a monthly basis for a period of 3 to 36 months, specified
dollar amounts from the Money Market Subaccount to other
Subaccounts. At least $250 must be transferred from the Money
Market Subaccount each month. The required amounts may be
allocated to the Money Market Subaccount through initial or
subsequent premium payments or by transferring amounts into the
Money Market Subaccount from the other Subaccounts or from the
Fixed Account (which may be subject to certain restrictions).
2. Election and Operation of the Program. The Owner may elect
this plan at the time of application by completing the
authorization on the application or at any time after the
Contract is issued by properly completing the election form and
returning it to Kansas City Life. The election form allows the
Owner to specify the number of months for the Dollar Cost
Averaging Plan to be in effect. Dollar cost averaging transfers
will commence on the next Monthly Anniversary Day on or next
following the Reallocation Date. Dollar cost averaging will
terminate at the completion of the designated number of months
or the day Kansas City Life receives Written Notice instructing
Kansas City Life to cancel the Dollar Cost Averaging Plan.
Transfers made from the Money Market Subaccount for the Dollar
Cost Averaging Plan will not count toward the six transfers
permitted each Contract Year without imposing the Transfer Processing Fee.
D. Portfolio Rebalancing Plan
1. General. The Owner may elect to have the accumulated
balance of each Subaccount redistributed to equal a specified
percentage of the Variable Account Value. This will be done on
a quarterly basis at three-month intervals from the Monthly
Anniversary Day on which the Portfolio Rebalancing Plan
commences.
2. Election and Operation of the Plan. If elected, this plan automatically
adjusts the Owner's Portfolio mix to be consistent
with the allocation most recently requested. The redistribution
will not count toward the six transfers permitted each Contract
Year without imposing the Transfer Processing Fee. If the
Dollar Cost Averaging Plan has been elected and has not been
completed, the Portfolio Rebalancing Plan will commence on the
Monthly Anniversary Day following the termination of the Dollar
Cost Averaging Plan.
III. "Redemption" Procedures: Full and Partial Surrenders,
Maturity Benefit, Death Benefits, and Loans
A. "Free-Look" Period
The Owner may cancel the Contract for a refund during the
"free-look" period. This period expires 10 days after the Owner
receives the Contract, 45 days after the application for the
Contract is signed, or 10 days after Kansas City Life mails or
delivers a Notice of Withdrawal Right (described below),
whichever is latest. If the Owner decides to cancel the
Contract, the Owner must return it by mail or other delivery
method to the Home Office or to the authorized Kansas City Life
agent who sold it. Immediately after mailing or delivery, the
Contract will be deemed void from the beginning. Within seven
calendar days after Kansas City Life receives the returned
Contract, Kansas City Life will refund premiums paid. In some
states we may be required to refund the greater of Contract
Value and premiums paid.
In addition, the Owner may cancel an increase in Specified
Amount that the Owner has requested within 10 days after the
Owner receives the adjusted Contract, within 45 days after the
date the application for the increased coverage is signed, or
within 10 days after Kansas City Life mails the Notice of
Withdrawal Right for the Specified Amount increase, whichever is
latest. The Specified Amount increase will be canceled from its
beginning and any charges attributable to the increase will be
returned to Contract Value.
B. Notice of Withdrawal Right Required by Rule
6e-3(T)(b)(13)(viii)
Upon issuance of a Contract, Kansas City Life will send by
first class mail or personal delivery to the Contract Owner a
written document containing (i) a notice of the right to return
the Contract to Kansas City Life or to one of its authorized
agents before the latest of: (a) 10 days after the Owner
receives the Contract; (b) 45 days after the application for the
Contract is signed; and (c) 10 days after Kansas City Life mails
or delivers such notice of the right to return the Contract to
the Owner; (ii) a statement of Contract fees and other charges
and an illustration of guideline annual premiums, death
benefits, and cash surrender values applicable to the age, sex,
and risk class of the Insured; and (iii) a form of request for
refund of gross premiums paid on the Contract setting forth (a)
instructions as to the manner in which a refund may be obtained,
including the address to which the request form should be
mailed; and (b) spaces necessary to indicate the date of such
request, the Contract number, and the signature of the Contract
Owner.
C. Surrendering the Contract for Cash Surrender Value
The Owner may surrender the Contract at any time for its Cash
Surrender Value by submitting a written request to the Home
Office. Kansas City Life may require return of the Contract. A
Surrender Charge may apply. A surrender request will be
processed as of the date the Owner's written request and all
required documents are received. Payment will generally be made
within seven calendar days. The Cash Surrender Value may be
taken in one lump sum or it may be applied to a payment option.
The Owner's Contract will terminate and cease to be in force if
it is surrendered for one lump sum. It cannot later be
reinstated.
D. Partial Surrenders
1. General. The Owner may make partial surrenders under the
contract at any time, subject to the conditions below. The
Owner must submit a Written Request to the Home Office. Each
partial surrender must be at least $500. The partial surrender
amount may not exceed the Cash Surrender Value, less $300. A
Partial Surrender Fee will be assessed on a partial surrender.
This charge will be deducted from the Owner's Contract Value
along with the amount requested to be surrendered and will be
considered part of the surrender (together, "partial surrender
amount"). As of the date Kansas City Life receives a Written
Request for a partial surrender, the Contract Value will be
reduced by the partial surrender amount.
2. Allocation of Partial Surrender Among the Accounts. When
the Owner requests a partial surrender, the Owner can direct how
the partial surrender amount will be deducted from Contract
Value in the Subaccounts and Fixed Account. If the Owner
provides no directions, the partial surrender amount will be
deducted from Contract Value in the Subaccounts and Fixed
Account on a pro-rata basis.
3. Effect of Partial Surrender on Death Benefit. If Coverage
Option A is in effect, Kansas City Life will reduce the
Specified Amount by an amount equal to the partial surrender
amount, less the excess, if any, of the Death Benefit over the
Specified Amount at the time the partial surrender is made. If
the partial surrender amount is less than the excess of the
Death Benefit over the Specified Amount, the Specified Amount
will not be reduced. Kansas City Life reserves the right to
reject a partial surrender request if the partial surrender
would reduce the Specified Amount below the minimum amount for
which the Contract would be issued under Kansas City Life's
then-current rules, or if the partial surrender would cause the
Contract to fail to qualify as a life insurance contract under
applicable tax laws, as interpreted by Kansas City Life.
4. Date Partial Surrender Requests Are Processed. Partial
surrender requests will be processed as of the date the Owner's
written request is received in good order, and generally will be
paid within seven calendar days. A written request for a
partial surrender will be deemed to be good order when, among
other things, all required supporting documentation has been
received.
E. Surrender Charge
During the first fifteen Contact Years, a Surrender Charge
will be deducted from the Contract Value if the Contract is
completely surrendered or lapses or the Specified Amount is
reduced (including when a partial surrender reduces the
Specified Amount). The Surrender Charge is the sum of two
parts, the Deferred Sales Load and the Deferred Administrative
Expense. The total Surrender Charge will not exceed the maximum
Surrender Charge set forth in the Contract. An additional
Surrender Charge and Surrender Charge period will apply to each
portion of the Contract resulting from a Specified Amount
increase, starting with the effective date of the increase.
Any Surrender Charge deducted upon lapse is credited back to
the Contract Value upon reinstatement. The Surrender Charge on
the date of reinstatement will be the same as it was on the date
of lapse. For purposes of determining the Surrender Charge on
any date after reinstatement, the period the Contract was lapsed
will not count.
1. Deferred Sales Load. The Deferred Sales Load is 30% of
actual premiums paid up to a maximum premium amount shown in the
Contract. The maximum premium amount shown in the Contract is
based on the issue Age, sex, Specified Amount, and smoking class
applicable to the Insured. If the Owner increases the
Contract's Specified Amount, a separate Deferred Sales Load will
apply to the Specified Amount increase, based on the Insured's
Age, sex, and smoking class at the time of the increase.
The Deferred Sales Load in the first nine years of the
Surrender Charge period is 30% of actual premiums paid up to the
maximum premium amount shown in the Contract. After the ninth
year of the Surrender Charge Period, the Deferred Sales Load
declines until it reaches 0% in the fifteenth year of the
Surrender Charge period.
Notwithstanding the sales load applicable during a Surrender
Charge period, the Deferred Sales Load that applies during the
first two years of a Surrender Charge period may not exceed 30%
of premiums paid up to the first "SEC guideline annual premium,"
10% of premiums paid in excess of the first guideline annual
premium and up to the second SEC guideline annual premium, and
9% of premium payments paid in excess of two guideline annual
premiums. An "SEC guideline annual premium" is a hypothetical
level amount that would be payable to the Maturity Date for the
benefits provided under the Contract, assuming cost of insurance
rates based on the 1980 Commissioners Standard Ordinary
Mortality Tables, net investment earnings under the Contract at
an effective annual rate of 5%, and sales and other charges
imposed under the Contract.
2. Deferred Administrative Expense. The Table below shows the Deferred
Administrative Expense deducted if the Owner
surrenders, lapses, reduces the Specified Amount, or takes a
partial surrender during the first fifteen Contract Years or
during the fifteen years following an increase in Specified
Amount. The Deferred Administrative Expense is an amount per
$1,000 of Specified Amount and will grade down to zero at the
end of fifteen years.
Table of Deferred Administrative Expenses per $1,000 of Specified Amount
End of Year* Deferred Administrative Expense
1-5 5.00
6 4.50
7 4.00
8 3.50
9 3.00
10 2.50
11 2.00
12 1.50
13 1.00
14 0.50
15 0.00
* End of year means number of completed Contract years or
number of completed years following an increase in Specified
Amount.
After the fifth year, the Deferred Administrative Expense
between years will be pro-rated monthly. The charge for the
first five years will be level.
F. Partial Surrender Fee
Kansas City Life will deduct an administrative charge upon a
partial surrender. This charge is the lesser of 2% of the
amount surrendered or $25. This charge will be deducted from
the Contract Value in addition to the amount requested to be
surrendered and will be considered to be part of the partial
surrender amount.
G. Redemptions for Monthly Deduction
On the Allocation Date, Kansas City Life will deduct Monthly
Deductions for the Contract Date and each Monthly Anniversary
that have occurred prior to the Allocation Date. (The Monthly
Deduction is described in Appendix A.) Subsequent Monthly
Deductions will be made as of each Monthly Anniversary Day
thereafter. The Owner's Contract Date is the date used to
determine the Owner's Monthly Anniversary Day. The Monthly
Deduction consists of (1) cost of insurance charges, (2)
administration fees, and (3) any charges for supplemental and/or
rider benefits. The Monthly Deduction is deducted from the
Variable Accounts and Fixed Account pro rata on the basis of the
portion of Contract Value in each account on the Monthly
Anniversary Day.
H. Death Benefits
As long as the Contract remains in force, Kansas City Life
will pay the Death Benefit proceeds upon receipt at the Home
Office of proof of the Insured's death that Kansas City Life
deems satisfactory. Kansas City Life may require return of the
Contract. The Death Benefit will be paid in a lump sum
generally within seven calendar days of receipt of satisfactory
proof or, if elected, under a payment option. The Death Benefit
will be paid to the Beneficiary.
1. Amount of Death Benefit Proceeds. The Death Benefit
proceeds are equal to the sum of the Death Benefit under the
Coverage Option selected calculated on the date of the Insured's
death, plus any supplemental and/or rider benefits, minus any
Indebtedness on that date and, if the date of death occurred
during a grace period, minus any past due Monthly Deductions.
Under certain circumstances, including without limitation when
the age or sex of the Insured has been misstated or when the
Insured dies by suicide within two years of the Contract Date or
within two years after the effective date of any increase in the
Specified Amount, the amount of the Death Benefit may be further
adjusted.
If part or all of the Death Benefit is paid in one sum, Kansas
City Life will pay interest on this sum as required by
applicable state law from the date of receipt of due proof of
the Insured's death to the date of payment.
2. Coverage Options. The Contract Owner may choose one of two Coverage
Options, which will be used to determine the Death
Benefit. Under Option A, the Death Benefit is the greater of
the Specified Amount or the Applicable Percentage (as described
below) of Contract Value on the date of the Insured's death.
Under Option B, the Death Benefit is the greater of the
Specified Amount plus the Contract Value on the date of death,
or the Applicable Percentage of the Contract Value on the date
of the Insured's death.
If investment performance is favorable, the amount of the
Death Benefit may increase. However, under Option A, the Death
Benefit ordinarily will not change for several years to reflect
any favorable investment performance and may not change at all.
Under Option B, the Death Benefit will vary directly with the
investment performance of the Contract Value.
The "Applicable Percentage" is 250% when the Insured has
attained Age 40 or less, and decreases each year thereafter to
100% when the Insured has attained Age 95.
3. Initial Specified Amount and Coverage Option. The Initial Specified
Amount is set at the time the Contract is issued. The
Owner may change the Specified Amount from time to time, as
discussed below. The Owner selects the Coverage Option when the
Owner applies for the Contract. The Owner also may change the
Coverage Option, as discussed below.
4. Changes in Coverage Option. On or after the first Contract Anniversary,
the Owner may change the Coverage Option on the
Contract subject to the following rules. After the Coverage
Option has been changed, it cannot be changed again for the next
twelve Contract Months. After any change, the Specified Amount
must be at least $100,000 for issue Ages 0-49 and $50,000 for
issue Ages 50-80. The effective date of the change will be the
Monthly Anniversary Day that coincides with or next follows the
day that Kansas City Life receives and accepts the request.
Kansas City Life may require satisfactory evidence of
insurability. (See "Underwriting Requirements," above.)
When a change from Option A to Option B is made, the Specified
Amount after the change is effective will be equal to the
Specified Amount before the change. The Death Benefit will
increase by the Contract Value on the effective date of the
change. When a change from Option B to Option A is made, the
Specified Amount after the change will be equal to the Specified
Amount before the change is effected plus the Contract Value on
the effective date of the change.
5. Ability to Adjust Specified Amount. On or after the first Contract
Anniversary, the Owner may request a change in the
Specified Amount. Once the Specified Amount has been changed,
it cannot be changed again for the next twelve Contract Months.
If a change in the Specified Amount would result in total
premiums paid exceeding the premium limitations prescribed under
current tax law to qualify the Contract as a life insurance
contract, Kansas City Life will refund, after the next Monthly
Anniversary, to the Owner the amount of such excess above the
premium limitations.
Kansas City Life reserves the right to decline a requested
decrease in the Specified Amount if compliance with the
guideline premium limitations under current tax law resulting
from this decrease would result in immediate termination of the
Contract, or if to effect the requested decrease, payments to
the Owner would have to be made from the Contract Value for
compliance with the guideline premium limitations, and the
amount of such payments would exceed the Cash Surrender Value
under the Contract.
The Specified Amount after any decrease must be at least
$100,000 for Contracts that were issued at issue Ages 0-49 and
$50,000 for Contracts that were issued at issue Ages 50-80. A
decrease in Specified Amount will become effective on the
Monthly Anniversary Day that coincides with or next follows
receipt and acceptance of a request at the Home Office.
Any increase in the Specified Amount must be at least $25,000
and an application must be submitted. Kansas City Life reserves
the right to require satisfactory evidence of insurability. In
addition, the Insured's attained Age must be less than the
current maximum issue Age for the Contracts, as determined by
Kansas City Life from time to time.
The increase in Specified Amount will become effective on the
Monthly Anniversary Day on or next following the date the
request for the increase is received and approved. A new
Guaranteed Payment Period will begin on the effective date of
the increase and will continue for five years. The Contract's
Guaranteed Monthly Premium will be recalculated to reflect the
increase. If a Guaranteed Payment Period is in effect, the
Contract's Guaranteed Monthly Premium amount will also generally
be increased.
An increase in Specified Amount may be cancelled by the Owner
in accordance with the Contract's "free look" provisions. In
such case, the amount refunded will be limited to those charges
that are attributable to the increase.
A new Surrender Charge and Surrender Charge period will apply
to each portion of the Contract resulting from an increase in
Specified Amount, starting with the effective date of the
increase. After an increase, Kansas City Life will, for
purposes of calculating Surrender Charges, attribute a portion
of each premium payment the Owner makes to the Specified Amount
increase, even if the Owner does not increase the amount or
frequency of the Owner's premiums. Net premiums are allocated
based upon the proportion that the SEC guideline annual premium
for the Initial Specified Amount and each increase bears to
the total SEC guideline annual premium for the Contract.
For purposes of calculating Surrender Charges and cost of
insurance charges, any Specified Amount decrease will be used to
reduce any previous Specified Amount increase then in effect,
starting with the latest increase and continuing in the reverse
order in which the increases were made. If any portion of the
decrease is left after all Specified Amount increases have been
reduced, it will be used to reduce the Initial Specified Amount.
I. Loans
1. When Loans are Permitted. Prior to the death of the
Insured, the Owner may borrow against the Contract at any time
by submitting a written request to the Home Office, provided
that the Cash Surrender Value of the Contract is greater than
zero. The maximum loan amount is equal to the Contract's Cash
Surrender Value on the effective date of the loan less loan
interest to the next Contract Anniversary. Contract loans will
be processed as of the date the Owner's written request is
received and approved. Loan proceeds generally will be sent to
the Owner within seven calendar days.
2. Interest. Kansas City Life will charge interest on any Indebtedness at
an annual rate of 6.0%. Interest is due and
payable at the end of each Contract Year while a loan is
outstanding. If interest is not paid when due, the amount of
the interest is added to the loan and becomes part of the Indebtedness.
3. Loan Collateral. When a Contract loan is made, an amount sufficient to
secure the loan is transferred out of the
Subaccounts and the unloaned value in the Fixed Account and into
the Contract's Loan Account. Thus, a loan will have no
immediate effect on the Contract Value, but the Cash Surrender
Value will be reduced immediately by the amount transferred to
the Loan Account. The Owner can specify the Variable Accounts
and/or Fixed Account from which collateral will be transferred.
If no allocation is specified, collateral will be transferred
from each Subaccount and from the unloaned value in the Fixed
Account in the same proportion that the Contract Value in each
Subaccount and the unloaned value in the Fixed Account bears to
the total Contract Value in those accounts on the date that the
loan is made. An amount of Cash Surrender Value equal to any
due and unpaid loan interest will also be transferred to the
Loan Account on each Contract Anniversary. Due and unpaid
interest will be transferred from each Subaccount and the
unloaned value in the Fixed Account in the same proportion that
each Subaccount Value and the unloaned value in the Fixed
Account Value bears to the total unloaned Contract Value.
The Loan Account will be credited with interest at an
effective annual rate of not less than 4%. On each Monthly
Anniversary Day, the interest earned on the Loan Account since
the previous Monthly Anniversary Day will be credited to the
unloaned value in the Fixed Account.
4. Preferred Loan Provision. Beginning in the eleventh
Contract Year, a preferred loan may be made. The maximum amount
available for a preferred loan is the Contract Value less
premiums paid and may not exceed the maximum loan amount. The
amount in the Loan Account securing the preferred loan will be
credited with interest at an effective annual rate of 6.0%. The
preferred loan provision is not guaranteed.
5. Loan Repayment;. The Owner may repay all or part of the
Owner's Indebtedness at any time while the Insured is living and
the Contract is in force. Each loan repayment must be at least
$50.00. Loan repayments must be sent to the Home Office and
will be credited as of the date received. A loan repayment must
be clearly marked as "loan repayment" or it will be credited as
a premium. When a loan repayment is made, Contract Value in the
Loan Account in an amount equal to the repayment is transferred
from the Loan Account to the Subaccounts and the unloaned value
in the Fixed Account. Unless specified otherwise by the Owner,
loan repayment amounts will be transferred to the Subaccounts
and the unloaned value in the Fixed Account according to the
premium allocation instructions in effect at that time.
6. Reduction in Death Benefit. If the Death Benefit becomes
payable while a loan is outstanding, the Indebtedness will be
deducted in calculating the Death Benefit proceeds.
7. Default. If the Loan Account Value exceeds the Contract
Value less any applicable Surrender Charge on any Valuation Day,
the Contract will be in default. The Owner, and any assignee of
record, will be sent notice of the default. The Owner will have
a 61-day grace period to submit a sufficient payment to avoid
termination of coverage under the Contract. The notice will
specify the amount that must be repaid to prevent termination.
J. Payment Options
The Contract offers a variety of ways of receiving proceeds
payable under the Contract, such as on surrender, death or
maturity, other than in a lump sum. These payment options are
summarized below. The Owner may apply proceeds of $2,000 or
more which are payable under this Contract to any of the
following options:
1. Option 1 - Interest Payments. Kansas City Life will make
interest payments to the payee annually or monthly as elected.
Interest on the proceeds will be paid at the guaranteed rate of
3.0% per year and may be increased by additional interest paid
annually. The proceeds and any unpaid interest may be withdrawn
in full at any time.
2. Option 2 - Installments of a Specified Amount. Kansas City
Life will make annual or monthly payments until the proceeds
plus interest are fully paid. Interest on the proceeds will be
paid at the guaranteed rate of 3.0% per year and may be
increased by additional interest. The present value of any
unpaid installments may be withdrawn at any time.
3. Option 3 - Installments For a Specified Period. Payment of
the proceeds may be made in equal annual or monthly payments for
a specified number of years. Interest on the proceeds will be
paid at the guaranteed rate of 3.0% per year and may be
increased by additional interest. The present value of any
unpaid installments may be withdrawn at any time.
4. Option 4 - Life Income. Kansas City Life will pay an
income during the payee's lifetime. A minimum guaranteed
payment period may be chosen. Payments received under the
Installment Refund Option will continue until the total income
payments received equal the proceeds applied.
5. Option 5 - Joint and Survivor Income. Kansas City Life
will pay an income during the lifetime of two persons and will
continue to pay the same income as long as either person is
living. The minimum guaranteed payment period will be ten years.
6. Minimum Amounts. Kansas City Life reserves the right to
pay the total amount of the Contract in one lump sum, if less
than $2000. If payments are less than $50, payments may be made
less frequently at Kansas City Life's option. If Kansas City
Life has available at the time a payment option is elected
options or rates on a more favorable basis than those
guaranteed, the more favorable benefits will apply.
K. Delay in Redemptions or Transfers
Kansas City Life will ordinarily pay any Death Benefit
proceeds, loan proceeds, partial surrender proceeds, or full
surrender proceeds within seven calendar days after receipt at
the Home Office of all the documents required for such a
payment. Other than the Death Benefit, which is determined as
of the date of death, the amount will be determined as of the
date of receipt of required documents. However, Kansas City
Life may delay making a payment or processing a transfer request
if (1) the New York Stock Exchange is closed for other than a
regular holiday or weekend, trading is restricted by the SEC, or
the SEC declares that an emergency exists as a result of which
the disposal or valuation of Variable Account assets is not
reasonably practicable; or (2) the SEC by order permits
postponement of payment to protect Kansas City Life's Contract
Owners.
L. 24-Month Conversion Right
The conversion right required by Rule 6e-3(T)(b)(13)(v)(B) is
provided by permitting the Contract Owner during the first 24
Contract Months following the Contract Date and during the first
24 Contract Months following the effective date of an increase
to the Specified Amount, to exercise a one-time Special Transfer
Right by requesting that all or a portion of the Variable
Account Value be transferred to the Fixed Account. Exercise of
the Special Transfer Right does not count toward the six
transfers that are permitted each Contract Year without imposing
the Transfer Processing Fee, and is not subject to a Transfer
Processing Fee. Since a new contract, under which payments (or
charges), dividends, and cash values could vary from those under
the existing Contract, will not be issued, no adjustment in
payments and cash values under the Contract would be required to
address such variances.
M. Maturity Benefit
The Maturity Date is the Contract Anniversary an or next
following the Insured's 95th birthday. If the Contract is still
in force on the Maturity Date, the Maturity Benefit will be paid
to you. The Maturity Benefit is equal to the Cash Surrender
Value on the Maturity Date.
APPENDIX A
On the Allocation Date, Kansas City Life will deduct Monthly
Deductions for the Contract Date and each Monthly Anniversary
Day that have occurred prior to the Allocation Date. Subsequent
Monthly Deductions will be made as of each Monthly Anniversary
Day thereafter. The Contract Date is the date used to determine
the Monthly Anniversary Day. The Monthly Deduction consists of
(1) cost of insurance charges, (2) administration fees (the
"Monthly Expense Charge"), and (3) any charges for supplemental
and/or rider benefits. The Monthly Deduction is deducted from
the Variable Accounts and Fixed Account pro rata on the basis of
the portion of Contract Value in each account on the Monthly
Anniversary Day.
Cost of Insurance Charge. This charge compensates Kansas City
Life for the expense of providing insurance coverage. The
charge depends on a number of variables and therefore will vary
from Contract to Contract and from Monthly Anniversary Day to
Monthly Anniversary Day. For any Contract, the cost of
insurance on a Monthly Anniversary Day is calculated by
multiplying the current cost of insurance rate for the Insured
by the net amount at risk on that Monthly Anniversary Day.
The net amount at risk on a Monthly Anniversary Day is the
difference between the Death Benefit, discounted with one month
of interest and the Contract Value, as calculated on that
Monthly Anniversary Day before the cost of insurance charge is
taken. The interest rate used to discount the Death Benefit is
the current interest rate that is being credited on portions of
any Net Premiums that are allocated to the Fixed Account as of
that Monthly Anniversary Day.
The cost of insurance rate for a Contract on a Monthly
Anniversary Day is based on the Insured's Age, sex, number of
completed Contract Years, and risk class, and therefore varies
from time to time. Kansas City Life currently places Insureds
in the following classes, based on underwriting: Standard
Smoker, Standard Nonsmoker, or Preferred Nonsmoker. An Insured
may be placed in a substandard risk class, which involves a
higher mortality risk than the Standard Smoker or Standard
Nonsmoker classes. Standard Nonsmoker rates are available for
Issue Ages 0-80. Standard Smoker and Preferred Nonsmoker rates
are available for Issue Ages 15-80.
The cost of insurance rate for an increase in Specified Amount
will be determined on each Monthly Anniversary Day and is based
on the Insured's Age, sex, number of completed Contract Years,
and risk class.
Kansas City Life places the Insured in a risk class when the
Contract is given underwriting approval, based on Kansas City
Life's unditing of the application. When an increase in
Specified Amount is requested, Kansas City Life conducts
underwriting before approving the increase (except as noted
below) to determine the risk class that will apply to the
increase. If the risk class for the increase has lower cost of
insurance rates than the existing risk class, the lower rates
will apply to the entire Specified Amount. If the risk class
for the increase has higher cost of insurance rates than the
existing class, the higher rates will apply only to the increase
in Specified Amount, and the existing risk class will continue
to apply to the existing Specified Amount.
Kansas City Life does not conduct underwriting for an increase
in Specified Amount if the increase is requested as part of a
conversion from a term contract or on exercise of the Option to
Increase the Specified Amount Rider. In the case of a term
conversion, the risk class that applies to the increase will be
based on the provisions of the term contract. In the case of an
increase under the Option to Increase Specified Amount Rider,
the Insured's risk class for an increase will be the class in
effect on the initial Specified Amount at the time that the
increase is elected.
The net amount at risk associated with a Specified Amount
increase is determined by the percentage that the Specified
Amount increase bears to the Contract's total Specified Amount
immediately following the increase. The resulting percentage is
the part of the Contract's total net amount at risk that is
attributed to the Specified Amount increase. The remaining
percentage of the Contract's total net amount at risk is
attributed to the existing Specified Amount. (For example, if
the Contract's Specified Amount is increased by $100,000 and the
total Specified Amount is $250,000, then 40% of the total net
amount at risk is attributed to the Specified Amount increase.)
On each Monthly Anniversary Day, the net amount at risk used to
determine the cost of insurance charge associated with the
Specified Amount increase is the Contract's total net amount of
risk at that time, multiplied by the percentage calculated as
described above. This percentage remains fixed until the
Specified Amount is changed.
Kansas City Life guarantees that the cost of insurance rates
used to calculate the monthly cost of insurance charge will not
exceed the maximum cost of insurance rates set forth in the
contracts. The guaranteed rates for standard and preferred
classes are based on the 1980 Commissioners' Standard Ordinary
Mortality Tables, Male or Female, Smoker or Nonsmoker Mortality
Rates ("1980 CSO Tables"). The guaranteed rates for substandard
classes are based on multiples of or additives to the 1980 CSO
Tables.
Kansas City Life's current cost of insurance rates may be less
than the guaranteed rates that are set forth in the Contract.
Current cost of insurance rates will be determined based on
Kansas City Life's expectations as to future mortality
experience. These rates may change from time to time.
Monthly Expense Charge
Kansas City Life will begin deducting the Monthly Expense Charge
from the Contract Value as of the Contract Date. Thereafter,
Kansas City Life will deduct a Monthly Expense Charge from the
Contract Value as of each Monthly Anniversary Day. The Monthly
Expense Charge is made up of two parts:
(1) a maintenance charge which is a level monthly charge which
applies in all years. The maintenance charge is guaranteed not
to exceed $6.00.
(2) An acquisition charge which is a charge of $20 per Contract
Month for the first Contract Year and $20 per Contract Month for
12 months following the effective date of an increase in
Specified Amount.
The Monthly Expense Charge reimburses Kansas City Life for
expenses incurred in the administration of the Contracts and the
Variable Account. Such expenses include but are not limited to:
underwriting and issuing the Contract, confirmations, annual
reports and account statements, maintenance of Contract records,
maintenance of Variable Account records, administrative
personnel costs, mailing costs, data processing costs, legal
fees, accounting fees, filing fees, the costs of other services
necessary for Contract Owner servicing and all accounting,
valuation, regulatory and updating requirements.
Supplemental and/or Rider Benefits
The following supplemental and/or rider benefits are available
and may be added to the Owner's Contract. Monthly charges for
these benefits and/or riders will be deducted from the Owner's
Contract Value as part of the Monthly Deduction. All of these
riders may not be available in all states.
Disability Continuance of Insurance (DCOI)
Issue Ages: 15-55, renewal through age 59
This rider covers the Contract's Monthly Deductions during the
period of total disability of the Insured. DCOI benefits become
payable after the Insured's total disability exists for six
consecutive months and total disability occurs before age 60.
Benefits under this rider continue until the Insured is no
longer totally disabled.
Accidental Death Benefit (ADB)
Issue Ages: 0-60
This rider provides for the payment of an additional amount of
insurance in the event of accidental death. The rider
terminates when the Insured attains age 70.
Option to Increase Specified Amount (Assured Insurability - AI)
Issue Ages: 0-38
This rider allows the Specified Amount of the Contract to
increase by the option amount or less, without evidence of
insurability on the Insured. These increases may occur on
regular option dates or alternate option dates. See the rider
contract for the specific dates.
Spouse's Term insurance (STI)
Issue Ages: 15-50 (Spouse's age)
This rider provides decreasing term insurance on the Insured's
spouse. The amount of insurance coverage is expressed in units
and a maximum number of five units may be purchased. The amount
of insurance per unit of coverage is based on the Insured
Spouse's attained age. A table specifying the amount of
insurance per unit of coverage is in the rider contract.
Children's Term Insurance (CTI)
Issue Ages: 14 Days - 17 Years (Children's ages)
This rider provides level term insurance on each Insured Child.
This term insurance continues until the Contract anniversary on
which the Insured Child's attained age is 25. The rider expires
on the Contract Anniversary on which the Insured is age 65.
Other Insured Term Insurance (OI)
Issue Ages: 0-65 (Other Insured's age)
This rider provides level yearly renewable term coverage on the
Insured, the Insured's spouse, and/or children. The coverage
expires at the earlier of the Contract Anniversary on which the
Insured or the Other Insured is age 95 unless an earlier date is
requested. The term insurance provided by this rider can be
converted to a permanent contract at any time the rider is in
force without evidence of insurability.
Extra Protection (EXP)
Issue Ages: 0-80
This rider provides level yearly renewable term coverage on the
Insured. The coverage expires at the Contract Anniversary on
which the Insured is age 95 unless an earlier date is requested.
Disability Premium Benefit Rider (DPB)
Issue Ages: 15-55, renewal through 59
This rider provides for the payment of the disability premium
benefit amount as premium to the Contract during a period of
total disability of the Insured. The DPB benefit amount is a
monthly amount that is requested by the Owner.
Bonus on Contract Value in the Variable Account
A bonus may be credited to the Contract on each Monthly
Anniversary Day beginning in the eleventh Contract Year. The
monthly bonus equals 0.0375% (0.45% on an annualized basis) of
the Contract Value in each Subaccount of the Variable Account at
the end of each Contract Month. This bonus is not guaranteed,
and Kansas City Life may decide not to pay the bonus.
April 26, 1996
Kansas City Life Insurance Company
3520 Broadway
Kansas City, MO 64111-2565
Re: Registration Statement
To Whom It May Concern:
In connection with the proposed registration under the Securities Act of
1933, as amended, of individual variable life insurance contracts (the
"Contracts") and interests in the Kansas City Life Variable Life Separate
Account (the "Separate A ccount"), I have examined the documents relating to the
establishment of the Separate Account by the Board of Directors of Kansas City
Life Insurance Company (the "Company") as a separate account for assets
applicable to variable life insurance contr acts, pursuant to Section 376.309
RSMo., as amended, and the Registration Statement, on Form S-6 (the
"Registration Statement"), and I have examined such other documents and reviewed
such matters of law as I deem necessary for this opinion, and I adv ise you that
in my opinion:
1. The Separate Account is a separate account of the Company duly
created and validly existing pursuant to the laws of the State of
Missouri.
2. The Contracts, when issued in accordance with the Prospectus
constituting a part of the Registration Statement and upon compliance with
applicable local law, will be legal and binding obligations of the Company in
accordance with their respective terms.
3. The portion of the assets held in the Separate Account equal to
reserves and other contract liabilities with respect to the Separate
Account are not chargeable with liabilities arising out of any other
business the Company may conduct.
I consent to the filing of this opinion as an exhibit to the
Registration Statement and the use of my name under the heading "Legal Matters"
in the Prospectus constituting a part of the Registration Statement and to the
references to me where ver appearing therein.
Yours very truly,
/s/C. John Malacarne
C. John Malacarne
CJM/jp
Actuarial Opinion
In my capacity as Vice President and Associate Actuary of Kansas City Life
Insurance Company, I have provided actuarial advice concerning:
The preparation of Post-Effective Amendment No. 1 to the registration statement
on Form S-6, filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, with respect to flexible premium variable
life insurance cont ract (the "Registration Statement") and
The preparation of contract forms for the flexible premium variable life
insurance contracts described in the Registration Statement (the "Contract").
It is my professional opinion that:
The "sales load" as defined in paragraph (c)(4) of Rule 6e-3(T) under the
Investment Company Act of 1940, will not exceed nine percent of the sum of the
guideline annual premiums that would be paid during the period equal to the
lesser of 20 years of the life expectancy based on the 1980 Commissioners
Standard Ordinary Mortality Table. Such sales load will not exceed the sum of
a) 30 percent of payment in an aggregate amount less than or equal to one
guideline annual premium plus b) 10 percent of each payment made in excess of
one guideline annual premium but not more than two guideline premiums, plus c)
nine percent of each payment made in excess of two guideline annual premiums.
The sales load is deducted upon surrender of a decrease in specified amount
during the first 15 contract years or within 15 years of an increase in face
amount as described under "Surrender Charges" in the Prospectus.
With respect to increases in face amount, the amount of sales load imposed is
not more than the amount of sales load permissible under the base test contract
and the incremental test contract as defined in paragraph (d)(2) of Rule 6e-3
(T).
The proportionate amount of the sales load deducted from any payment during the
contract period shall not exceed the proportionate amount deducted from any
prior payment during the policy period.
The illustrations of death benefits, account values, net cash surrender values
and accumulated premiums in the Prospectus, based on the assumptions stated in
the illustrations, are consistent with the provisions of the Contracts. The
rate structure of the Contracts has not been designed as to make the
relationship between premiums and benefits, as shown in the illustrations,
appear to be correspondingly more favorable to prospective purchasers of
Contracts age 35 in the underwriting classes i llustrated than to prospective
purchasers of Contracts at other ages or underwriting classes.
I hereby consent to the filing of this opinion as an Exhibit to the Registration
Statement and to the use of my name under the heading "Experts" in the
Prospectus.
Sincerely,
/s/ Mark A. Milton
Mark A. Milton, FSA, MAAA
Vice President and Associate Actuary
Kansas City Life Insurance Company
Exhibit 7(a)
Consent of Ernst & Young LLP
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 22, 1996, with respect to the
consolidated financial statements of Kansas City Life Insurance Company
included in the Post-effective Amendment No. 1 to the Registration Statement
(Form S-6 No. 33-95354) and the related Prospectus.
/s/Ernst & Young LLP
Ernst & Young LLP
Kansas City, Missouri
April 29, 1996
Exhibit 7(b)
Consent of Sutherland, Asbill & Brennan
April 18, 1996
Kansas City Life Insurance Company
3520 Broadway
Kansas City, MO 64141-6139
Re: Kansas City Life Variable Life Separate Account
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus filed as part of Post-Effective Amendment No. 1 to
Form S-6 for Kansas City Life Variable Life Separate Account (File No. 33-
95354). In giving this consent, we do not admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of
1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN
By: /s/ Stephen E. Roth
Stephen E. Roth
EXHIBIT 8
UNDERTAKING PURSUANT TO
RULE 27D-2 UNDER
THE INVESTMENT COMPANY ACT OF 1940
Pursuant to Rule 27d-2 under the Investment Company Act of 1940 (the "Act"),
Kansas City Life Insurance Company (the "Company") hereby undertakes, with
respect to certain variable life insurance contracts (the "Contracts") supported
by Kansas City Life Variable Life Separate Account (the "Account") and covered
by a Registration Statement on Form S-6 (File No. 33-95354) filed with the
Securities and Exchange Commission, to guarantee the performance of all
obligations of the depositor of the Account, namely the Company, and the
principal underwriter of the Account, namely, Sunset Financial Services, Inc.,
under Section 27(f) and Rule 6e-3(T) of the Act to refund charges with respect
to any payments made to Contract Owners upon a return of a Contract within the
period provided for such return in Rule 6e-3(T)(b)(13)(viii) under the Act.
KANSAS CITY LIFE INSURANCE COMPANY
By: /s/C. John Malacarne
Vice President, General Counsel and Secretary
Date: April 30, 1996
