As filed with the Securities and Exchange Commission on April 30, 1997.
Registration No. 33-95354
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 2 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, 1997 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.
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
PROSPECTUS
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACTS
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT OF
Kansas City Life Insurance Company
Home Office:
Correspondence to:
3520 Broadway Variable Administration
Kansas City, Missouri 64111-2565 P.O. Box 419364
Telephone (816) 753-7000 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 22. The
assets of each Subaccount are invested in a corresponding portfolio (each, a
"Portfolio") of MFSR Variable Insurance TrustR ("MFS Trust"), of American
Century Variable Portfolios, Inc. ("American Century Variable Portfolios"),
of Federated Insurance Series, of Dreyfus Variable Investment Fund and of
Dreyfus Stock Index Fund. (MFS Trust, American Century Variable Portfolios,
Federated Insurance Series, Dreyfus Variable Investment Fund and Dreyfus Stock
Index Fund are each referred to as a "Fund"). Each Fund is managed by the
investment adviser shown below:
MFSr Variable Insurance TrustSM Manager
MFS Emerging Growth Series Massachusetts Financial Services
MFS Research Series Company
MFS Total Return Series
MFS Utilities Series
MFS World Governments Series
MFS Bond Series
American Century Variable Portfolios Manager
American Century VP Capital Appreciation American Century Investment
American Century VP International Management, Inc.
Federated Insurance Series Manager
Federated American Leaders Fund II Federated Advisers
Federated High Income Bond Fund II
Federated Prime Money Fund II
Dreyfus Variable Investment Fund Manager
Capital Appreciation Portfolio The Dreyfus Corporation
Small Cap Portfolio
Dreyfus Stock Index Fund Manager
The Dreyfus Corporation
The accompanying prospectuses for MFS Trust, American Century
Variable Portfolios,Federated Insurance Series, Dreyfus Variable Investment
Fund and Dreyfus Stock Index Fund describe their respective Portfolios,
including the risks of investing in the Portfolios, and provide other
information on MFS Trust, American Century Variable Portfolios, Federated
Insurance Series, Dreyfus Variable Investment Fund and Dreyfus Stock Index
Fund.
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, AMERICAN CENTURY
VARIABLE PORTFOLIOS, INC., FEDERATED INSURANCE SERIES, DREYFUS VARIABLE
INVESTMENT FUND AND DREYFUS STOCK INDEX FUND 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, 1997.
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
Reduced Charges for Eligible Groups
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 Contract
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
Telephone Transfer, Premium Allocation and Loan Privileges
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 19.
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 19.
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, for as long as it remains in force, provides lifetime insurance
protection on the Insured named in the Contract through the Maturity Date.
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 19. 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 34.
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 35. 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 18. 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 20.
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 21.
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
(This is the beginning of a box)
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 19.
Under certain circumstances, which include taking excessive Contract loans,
extra premium payments may be required to prevent lapse. See page 19.
(This is the end of a box)
(THis is the beginning of a box)
(DEDUCTIONS FROM PREMIUM PAYMENTS
For state and local premium taxes
(2.25 % of premium payments). See page 23.
(This is the end of a box)
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(NET PREMIUM PAYMENTS
You direct the allocation of Net Premium payments among 14 Subaccounts
of the Variable Account and the Fixed Account. See page 20 for rules and
limits on Net Premium payment allocations.
Each Subaccount invests in a
corresponding portfolio of a mutual fund:
Mutual Fund Portfolio
MFSr Variable Insurance TrustSM MFS Emerging Growth Series
Manager: Massachusetts Financial Services MFS Research Series
Company MFS Total Return Series
MFS Utilities Series
MFS World Governments Series
MFS Bond Series
American Century Variable Portfolios American Century VP Capital
Manager: American Century Investment Appreciation
Management, Inc. American Century VP International
Federated Insurance Series Federated American Leaders Fund II
Manager: Federated Advisers Federated High Income Bond Fund II
Federated Prime Money Fund II
Dreyfus Variable Investment Fund Capital Appreciation Portfolio
Manager: The Dreyfus Corporation Small Cap Portfolio
Dreyfus Stock Index Fund Dreyfus Stock Index Fund
Manager: The Dreyfus Corporation
Interest is credited on amounts allocated to the Fixed Account at a minimum
guaranteed rate of 4%. See page 23 for rules and limits on transfers from
the Fixed Account allocations.
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(This is the beginning of a box)
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.
(This is the end of a box)
Annual Fund Expenses
<TABLE>
<CAPTION>
MFS
MFS MFS World
Emerging MFS Total MFS Govern- MFS
Growth Research Return Utilities ment Bond
Series Series Series Series Series Series
<S> <C> <C> <C> <C> <C> <C>
MFSr (Variable Insurance TrustSM Annual
Expenses
(as a percentage of averagenet assets)
Management Fees (Investment Advisory Fees) 0.75% 0.75% 0.75% 0.75% 0.75% 0.60%
Other Expenses (after any expense
reimbursement)1/2/ 0.25% 0.25% 0.25% 0.25% 0.25% 0.40%
Total Fund Annual Expenses1/ 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
<CAPTION>
AM Cent
VP Capital Am Cent VP
Appreciation International
<S> <C> <C>
American Century Variable Portfolios Annual
Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 1.00% 1.50%
Other Expenses 0.00% 0.00%
Total Fund Annual Expenses3/ 1.00% 1.50%
<CAPTION>
Federated
Federated High Income Federated
American Bond Prime
Leaders Fund II Money
Fund II Fund II
<S> <C> <C> <C>
Federated Insurance Series Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.53% 0.01% 0.00%
Other Expenses (after any expense reimbursement) 0.32% 0.79% 0.80%
Total Fund Annual Expenses5/ 0.85% 0.80% 0.80%
<CAPTION>
Dreyfus
Capital Dreyfus
Appreciation Small Cap
Portfolio Portfolio
<S> <C> <C>
Dreyfus Variable Investment Fund Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) .75% .75%
Other Expenses (after any expense reimbursement) .09% .04%
Total Fund Annual Expenses .84% .79%
Dreyfus
Stock
Index
Fund
<S> <C>
<CAPTION>
Dreyfus Stock Index Fund
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) .245%
Other Expenses (after any expense reimbursement) .055%
Total Fund Annual Expenses .300%
</TABLE>
Premium taxes, currently ranging up to 3.5%, may be applicable, depending
on various states' laws.
The above tables are intended to assist you in understanding the fund
expenses that you will bear, directly or indirectly. The tables reflect
expenses of the Funds. The Annual Expenses for the Funds are expenses for
the most recent fiscal year, except as noted below. For a more complete
description of the various expenses see the Prospectuses for the underlying
Funds that accompany this Prospectus.
__________________________
1/ The investment adviser to MFS Variable Insurance Trust has agreed to bear,
subject to reimbursement by each Series, such that each Series' "Other Expenses"
shall not esceed the following percentages of the average daily net assets
of the Series during the current fiscal year: 0.40% for the Bond Series, and
0.25% for each remaining Series. Absent this expense arrangement, "Other
Expenses" for the Emerging Growth Series, Research Series, Total Return Series,
Utilities Series, World Governments Series and Bond Series would by 0.41%,
0.73%, 1.35%, 2.00%, 1.28% and 8.85%, respectively, and Total Annual Fund
Expenses would be 1.16%, 1.48%, 2.10%, 2.75%, 2.03% and 9.45%, respectively,
for these Series.
2/ Each Series has an expense offset arrangement which reduces the Series'
custodian fee based upon the amount of cash maintained by the Series with
its custodian and dividend disbursing agent, and may enter into other such
arrangements and directed brokerage arrangements (which would also have the
effect of reducing the Series' expenses). Any such fee reductions are not
reflected under "Other Expenses."
3/ The investment adviser to American Century Variable Portfolios pays
all the expenses of the Fund except brokerage, taxes, interest, fees and
expenses of the non-interested person directors (including counsel fees)
and extraordinary expenses. For its services, the adviser is paid a fee
of 1.50% and 1.00% of the average net assets of the Am Cent VP
International and Am Cent VP Capital Appreciation, respectively.
4/ The Total Fund Annual Expenses for the Federated American Leaders Fund II,
Federated High Income Bond Fund II and the Federated Prime Money Fund II are
0.85%, 0.80%, and 0.80%, respectively, of the average daily net assets. The
adviser to Federated Insurance Series has agreed to waive all or a portion of
its fee so that the Total Fund Annual Expenses would not exceed .85%, .80%,
and .80% respectively, of average net assets of those Portfolios. The
adviser can terminate this voluntary waiver at any time at its sole discretion.
Without this waiver, the Management Fees would be .75%, .60% and .50% of the
average net assets of Federated American Leaders Fund II, Federated High
Income Bond Fund II and the Federated Prime Money Fund II, respectively, and
the Total Fund Annual Expenses for these Portfolios would be 1.07%, 1.39%,
and 1.37%, respectively, of average net assets.
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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 32 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 34.
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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 18.
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 page 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 (wher e 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 ot her 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 o therwise 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 r eserves 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, American Century Variable Portfolios, Federated Insurance Series,
Dreyfus Variable Investment Fund and Dreyfus Stock Index Fund are each
registered with the SEC as a diversified open-end management investment company
under the 1940 Act, a lthough 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 obje ctives of each of the Portfolios is
described below.
MFSr Variable Insurance TrustSM
(Manager: Massachusetts Financial Services Company)
MFS Emerging Growth Series. 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).
MFS Research Series. 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.
MFS Total Return Series. 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 s econdary 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.
MFS Utilities Series. 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 obje ctive 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.
MFS World Governments Series. 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 th rough a professionally managed, internationally
diversified portfolio consisting primarily of debt securities and to a lesser
extent equity securities.
MFS Bond Series. 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' capi tal. 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 TrustSM, which should be read carefully before investing.
American Century Variable Portfolios, Inc. (formerly TCI Portfolios, Inc.)
(Manager: American Century Investment Management, Inc. (formerly Investors
Research Corporation))
American Century VP Capital Appreciation Portfolio (formerly TCI Growth
Portfolio). The investment objective of American Century VP Capital
Appreciation is capital growth. The Portfolio will seek to achieve its
investment objective by inves ting primarily in common stocks that are
considered by the investment adviser to have better-than-average prospects for
appreciation.
American Century VP International Portfolio (formerly TCI International
Portfolio). The investment objective of American Century VP International
Portfolio is capital growth. The Portfolio will seek to achieve its investment
objective by inv esting 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
(Manager: Federated Advisers)
Federated American Leaders Fund II. 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. 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 obligati ons 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. The investment objective of the
Federated Prime Money Fund II is to provide current income consistent with
stability of principal and liquidity. The Fund pursues its investment objective
by investing exclusive ly in a portfolio of money market instruments maturing in
397 days or less.
Dreyfus Variable Investment Fund
(Manager: The Dreyfus Corporation)
Capital Appreciation Portfolio. The primary investment objective of the
Capital Appreciation Portfolio is to provide long-term capital growth consistent
with the preservation of capital. Current income is a secondary investment
objective. This series invests primarily in the common stocks of domestic and
foreign issuers.
Small Cap Portfolio. The investment objective of the Small Cap
Portfolio is to maximize capital appreciation. This series invests primarily in
common stocks of domestic and foreign issuers. This series will be particularly
alert to compani es that it considers to be emerging smaller-sized companies
which are believed to be characterized by new or innovative products, services
or processes which should enhance prospects for growth in future earnings.
Dreyfus Stock Index Fund
(Manager: The Dreyfus Corporation)
The primary investment objective of the Stock Index Fund is to provide
investment results that correspond to the price and yield performance of
publicly traded common stocks in the aggregate, as represented by the Standard &
Poor's 500 Composite Stoc k Price Index. In anticipation of taking a market
position, the Fund is permitted to purchase and sell stock index futures. The
Fund is neither sponsored by nor affiliated with Standard & Poor's.
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 P ortfolios 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 pays 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
percentages differ, and Kansas City Life is paid a greater percentage by
some investment advisers or distributors than other advisers or distributors.
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 con tracts.
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 Valu es 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 owner s 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. S ee
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 lon ger 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. Su bject 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 sep arate 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, Kans as 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 f or 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 meet ing 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, 30 th 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 Con tract 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 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 th e 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 f irst 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 th e 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 t he 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 non smoker 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 ch anged 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 b e 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 ch arges 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 y ou 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
(except in Texas) 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 20.
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," page 32.
Planned Periodic Premiums. When applying for a Contract, you select a
plan for paying level premium payments monthly, 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.
Subject to the limits described above, you can change the amount and frequency
of Planned Periodic Premiums at any time. 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 th e 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 be nefits 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 refl ect 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 l ess than required to guarantee the Contract will not lapse
during the Guaranteed Payment Period. See "Guaranteed Payment Period and
Guaranteed Monthly Premium," page 19.
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 De ath 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 Pro ceeds," 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. (In Texas we
cannot limit the number of subaccounts.) You can change the allocation
percentages at any time, subject to these rules, by sending Written Notice to
the Home Office. Changes in your allocation may also be made by telephone if
the appropriate election has been made at the time of application or proper
authorization has been provided to us. See "Telephone Transfer, Premium
Allocation and Loan Privileges," page 51. 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. On the
Reallocation Date the 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
Period 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 prem ium 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 Valuation Day that we receive Written Notice
requesting such transfer. Transfers may also be made by telephone if the
appropriate election has been made at the time of application or proper
authorization has been provided to use. See "Telephone Transfer, Premium
Allocation and Loan Privileges," page 53. 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 mad e from the Fixed Account each Contract
Year. See "Transfers from Fixed Account," page 23, 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, 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.
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 a mounts 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 or the date
you request. Dollar cost averaging w ill 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 Fund II 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 t he 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 Co st 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 w hen you request any transfer or the day we receive
Written Notice instructing us to cancel the Portfolio Rebalancing Plan. If the
Contract Value is negative at the time portfolio rebalancing is scheduled, the
re-distribution will not be completed.
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 min imum 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 Fixe d 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 or transfers 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 wil l 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.
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, specified amount
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 underwrit ing 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 t he 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 th e 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 determin e 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 Amoun t 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 class es 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 femal es of the same age will generally differ. (In some states, the
cost of insurance rates do not vary by sex.)
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 o f 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.
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.
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 reques t 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 Contract 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 Amou nt). 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 hypothetica l 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 Contra ct 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.
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.
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.
Reduced Charges for Eligible Groups
The sales charge and administration charges otherwise applicable may be reduced
with respect to Contracts issued to a class of associated individuals or to a
trustee, employer or similar entity where Kansas City Life anticipates that the
sales to the members of the class will result in lower than normal sales or
administrative expenses. These reductions will be made in accordance with our
rules in effect at the time of the application for a Contract. The factors we
will consider in determining the eligibility of a particular group for reduced
charges and the level of the reduction are as follows: the nature of the
association and its organizational framework, the method by which sales will be
made to the members of the class, the facilit y with which premiums will be
collected from the associated individuals and the association's capabilities
with respect to administrative tasks, the anticipated persistency of the
Contract, the size of the class of associated individuals and the numb er of
years it has been in existence and any other such circumstances which justify a
reduction in sales or administrative expenses. Any reduction will be
reasonable and will apply uniformly to all prospective Contract purchases in
the class and will not be unfairly discriminatory to the interests of any
Contract holder.
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 agai nst 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 Valu e. 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 19,
and "Grace Period," page 20.
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 di viding 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 S ubaccount.
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 Subaccou nt, 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 con nection with Contract loans), plus interest credited on such
Net Premium payments and amounts transferred, 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.
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 tak en, 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 34). 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 o f 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," pa ge 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 Valu e 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 36.
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 Opt ion, as discussed below.
Changes in Coverage Option
We reserve the right to require that no change in Coverage Option occur during
the first Contract Year and that no more than one change in Coverage Option be
made in any 12-month period. After any change, the Specified Amount must be at
least $100,0 00 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. Kansas
City Life may require sati sfactory evidence of insurability.
Changes in Specified Amount
You may request a change in the Specified Amount. We reserve the right to
require that the Contract be in force for one Contract Year before a change in
Specified Amount; and, we reserve the right to only allow one change in
Specified Amount every t welve 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, aft er 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 26.
Any increase in the Specified Amount must be at least $25,000 and an application
must be submitted. (In Pennsylvania and Texas an increase in the Specified
Amount must be at least $100,000 for ages 0-49 and $50,000 for ages 50-80 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 increa se 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 increa sed. See
"Guaranteed Payment Period and Guaranteed Monthly Premium," page 19 and "Premium
Payments Upon Increase in Specified Amount,"
page 19.
An increase in Specified Amount may be canceled 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 18.
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 26). 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 pre miums. 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 o rder 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. Loans may also be made
by telephone if the appropriate election has been made at the time of
application or proper authorization has been provided to us. See "Telephone
Transfer, Premium Allocation, and Loan Privileges," page 51. 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 req uest 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 in terest 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 immedia te 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 th e 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 interes t 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 4.0%. 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 a nd the amount credited to the Loan Account). Interest earned on
the Loan Account will be added to 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 amo unt 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. 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 cr edited 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 repaym ent 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 Cont ract 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.
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 intere st 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. In addition, interest paid on Contract Loans generally is not tax
deductible.
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.
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 26. A sur render 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 34. 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.
(In Texas, if a surrender is requested within 31 days after a Contract
Anniversary, the Cash Surrender Value applicable to the Fixed Account Value will
not be less than the Cash Surrender Value applicable to the Fixed Account on
that anniversary, less any policy loans or partial surrenders made on or after
such Anniversary.)
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 yo ur Contract Value in the Subaccounts and Fixed Account on a
pro-rata basis. See "Minimum Guaranteed and Current Interest Rates," page 22.
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 wo uld 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 ap plicable 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 a nnuities 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 ($2,000 minimum may not apply in some states)
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 ad ditional 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 r isks. 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 Val ue to fund the purpose for which the
Contract was purchased. Partial surrenders and Contract loans may significantly
affect current and future Contract Value, Cash Surrender Value, or Death Benefit
proceeds. Depending upon Subaccount investment per formance 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 B enefits 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 compo unded 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 14 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 .92% of the
average dai ly 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 effect ive 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 -1.81%, 4.14%
and 10.09%, 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 charge s 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. Th e 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 foll owing pages. All the
illustrations reflect the fact that no charges for Federal or 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 assumed ifferent 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% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Investment Return Investment Return Investment Return
End of Premiums Contract Cash Death Contract Cash Death Contract Cash Death
Contract Accum at 5% Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year Interest per year Value Value Value
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 481 0 100,000 524 0 100,000 567 0 100,000
2 2,153 1,184 264 100,000 1,307 388 100,000 1,436 516 100,000
3 3,310 1,863 463 100,000 2,112 712 100,000 2,382 982 100,000
4 4,526 2,519 819 100,000 2,940 1,240 100,000 3,412 1,712 100,000
5 5,802 3,152 1,152 100,000 3,789 1,789 100,000 4,535 2,535 100,000
6 7,142 3,758 1,796 100,000 4,659 2,697 100,000 5,757 3,795 100,000
7 8,549 4,337 2,425 100,000 5,550 3,638 100,000 7,087 5,175 100,000
8 10,027 4,890 3,028 100,000 6,462 4,600 100,000 8,537 6,675 100,000
9 11,578 5,414 3,602 100,000 7,395 5,583 100,000 10,118 8,306 100,000
10 13,207 5,909 4,399 100,000 8,347 6,837 100,000 11,841 10,331 100,000
15 22,657 8,195 8,195 100,000 13,815 13,815 100,000 23,808 23,808 100,000
20 34,719 9,671 9,671 100,000 20,063 20,063 100,000 43,289 43,289 100,000
25 50,113 9,848 9,848 100,000 26,896 26,896 100,000 75,615 75,615 101,324
30 69,761 7,842 7,842 100,000 33,904 33,904 100,000 129,094 129,094 157,494
</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% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Investment Return Investment Return Investment Return
End of Premiums Contract Cash Death Contract Cash Death Contract Cash Death
Contract Accum at 5% Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year Interest per year Value Value Value
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 481 0 100,000 524 0 100,000 567 0 100,000
2 2,153 1,184 264 100,000 1,307 388 100,000 1,436 516 100,000
3 3,310 1,863 463 100,000 2,112 712 100,000 2,382 982 100,000
4 4,526 2,519 819 100,000 2,940 1,240 100,000 3,412 1,712 100,000
5 5,802 3,152 1,152 100,000 3,789 1,789 100,000 4,535 2,535 100,000
6 7,142 3,758 1,796 100,000 4,659 2,697 100,000 5,757 3,795 100,000
7 8,549 4,337 2,425 100,000 5,550 3,638 100,000 7,087 5,175 100,000
8 10,027 4,890 3,028 100,000 6,462 4,600 100,000 8,537 6,675 100,000
9 11,578 5,414 3,602 100,000 7,395 5,583 100,000 10,118 8,306 100,000
10 13,207 5,909 4,399 100,000 8,347 6,837 100,000 11,841 10,331 100,000
15 22,657 7,888 7,888 100,000 13,375 13,375 100,000 23,142 23,142 100,000
20 34,719 8,784 8,784 100,000 18,664 18,664 100,000 40,854 40,854 100,000
25 50,113 7,936 7,936 100,000 23,676 23,676 100,000 69,271 69,271 100,000
30 69,761 4,184 4,184 100,000 27,467 27,467 100,000 115,592 115,592 141,022
</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% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Investment Return Investment Return Investment Return
End of Premiums Contract Cash Death Contract Cash Death Contract Cash Death
Contract Accum at 5% Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year Interest per year Value Value Value
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 480 0 100,480 523 0 100,523 566 0 100,566
2 2,153 1,180 80 101,180 1,303 203 101,303 1,432 332 101,432
3 3,310 1,856 456 101,856 2,104 704 102,104 2,372 972 102,372
4 4,526 2,507 807 102,507 2,924 1,224 102,924 3,395 1,695 103,395
5 5,802 3,132 1,132 103,132 3,765 1,765 103,765 4,505 2,505 104,505
6 7,142 3,729 1,767 103,729 4,622 2,660 104,622 5,709 3,747 105,709
7 8,549 4,297 2,385 104,297 5,497 3,585 105,497 7,017 5,105 107,017
8 10,027 4,837 2,975 104,837 6,389 4,527 106,389 8,436 6,574 108,436
9 11,578 5,346 3,534 105,346 7,296 5,484 107,296 9,976 8,164 109,976
10 13,207 5,823 4,313 105,823 8,217 6,707 108,217 11,647 10,137 111,647
15 22,657 7,975 7,975 107,975 13,412 13,412 113,412 23,062 23,062 123,062
20 34,719 9,220 9,220 109,220 19,041 19,041 119,041 40,932 40,932 140,932
25 50,113 9,019 9,019 109,019 24,526 24,526 124,526 68,683 68,683 168,683
30 69,761 6,473 6,473 106,473 28,690 28,690 128,690 111,465 111,465 211,465
</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% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Investment Return Investment Return Investment Return
End of Premiums Contract Cash Death Contract Cash Death Contract Cash Death
Contract Accum at 5% Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year Interest per year Value Value Value
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 480 0 100,480 523 0 100,523 566 0 100,566
2 2,153 1,180 80 101,180 1,303 203 101,303 1,432 332 101,432
3 3,310 1,856 456 101,856 2,104 704 102,104 2,372 972 102,372
4 4,526 2,507 807 102,507 2,924 1,224 102,924 3,395 1,695 103,395
5 5,802 3,132 1,132 103,132 3,765 1,765 103,765 4,505 2,505 104,505
6 7,142 3,729 1,767 103,729 4,622 2,660 104,622 5,709 3,747 105,709
7 8,549 4,297 2,385 104,297 5,497 3,585 105,497 7,017 5,105 107,017
8 10,027 4,837 2,975 104,837 6,389 4,527 106,389 8,436 6,574 108,436
9 11,578 5,346 3,534 105,346 7,296 5,484 107,296 9,976 8,164 109,976
10 13,207 5,823 4,313 105,823 8,217 6,707 108,217 11,647 10,137 111,647
15 22,657 7,663 7,663 107,663 12,962 12,962 112,962 22,379 22,379 122,379
20 34,719 8,312 8,312 108,312 17,590 17,590 117,590 38,376 38,376 138,376
25 50,113 7,075 7,075 107,075 21,158 21,158 121,158 61,825 61,825 161,825
30 69,761 2,876 2,876 102,876 22,005 22,005 122,005 95,701 95,701 195,701
</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% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Investment Return Investment Return Investment Return
End of Premiums Contract Cash Death Contract Cash Death Contract Cash Death
Contract Accum at 5% Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year Interest per year Value Value Value
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 503 0 100,000 546 0 100,000 590 0 100,000
2 2,153 1,226 337 100,000 1,352 463 100,000 1,483 594 100,000
3 3,310 1,925 525 100,000 2,180 780 100,000 2,456 1,056 100,000
4 4,526 2,600 900 100,000 3,030 1,330 100,000 3,515 1,815 100,000
5 5,802 3,251 1,455 100,000 3,904 2,108 100,000 4,669 2,873 100,000
6 7,142 3,875 2,129 100,000 4,800 3,054 100,000 5,925 4,179 100,000
7 8,549 4,473 2,777 100,000 5,717 4,021 100,000 7,294 5,598 100,000
8 10,027 5,044 3,398 100,000 6,658 5,012 100,000 8,786 7,140 100,000
9 11,578 5,589 3,993 100,000 7,623 6,027 100,000 10,417 8,821 100,000
10 13,207 6,110 4,780 100,000 8,613 7,283 100,000 12,199 10,869 100,000
15 22,657 8,699 8,699 100,000 14,498 14,498 100,000 24,774 24,774 100,000
20 34,719 10,801 10,801 100,000 21,612 21,612 100,000 45,542 45,542 100,000
25 50,113 12,281 12,281 100,000 30,196 30,196 100,000 80,234 80,234 107,513
30 69,761 12,739 12,739 100,000 40,418 40,418 100,000 137,593 137,593 167,863
</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% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Investment Return Investment Return Investment Return
End of Premiums Contract Cash Death Contract Cash Death Contract Cash Death
Contract Accum at 5% Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year Interest per year Value Value Value
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 503 0 100,000 546 0 100,000 590 0 100,000
2 2,153 1,226 337 100,000 1,352 463 100,000 1,483 594 100,000
3 3,310 1,925 525 100,000 2,180 780 100,000 2,456 1,056 100,000
4 4,526 2,600 900 100,000 3,030 1,330 100,000 3,515 1,815 100,000
5 5,802 3,251 1,455 100,000 3,904 2,108 100,000 4,669 2,873 100,000
6 7,142 3,875 2,129 100,000 4,800 3,054 100,000 5,925 4,179 100,000
7 8,549 4,473 2,777 100,000 5,717 4,021 100,000 7,294 5,598 100,000
8 10,027 5,044 3,398 100,000 6,658 5,012 100,000 8,786 7,140 100,000
9 11,578 5,589 3,993 100,000 7,623 6,027 100,000 10,417 8,821 100,000
10 13,207 6,110 4,780 100,000 8,613 7,283 100,000 12,199 10,869 100,000
15 22,657 8,303 8,303 100,000 13,956 13,956 100,000 23,995 23,995 100,000
20 34,719 9,670 9,670 100,000 19,914 19,914 100,000 42,752 42,752 100,000
25 50,113 10,001 10,001 100,000 26,461 26,461 100,000 73,237 73,237 100,000
30 69,761 8,824 8,824 100,000 33,469 33,469 100,000 122,844 122,844 149,870
</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% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Investment Return Investment Return Investment Return
End of Premiums Contract Cash Death Contract Cash Death Contract Cash Death
Contract Accum at 5% Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year Interest per year Value Value Value
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 502 0 100,502 545 0 100,545 589 0 100,589
2 2,153 1,223 137 101,223 1,348 262 101,348 1,479 394 101,479
3 3,310 1,918 518 101,918 2,172 772 102,172 2,447 1,047 102,447
4 4,526 2,588 888 102,588 3,017 1,317 103,017 3,498 1,798 103,498
5 5,802 3,233 1,437 103,233 3,882 2,086 103,882 4,641 2,845 104,641
6 7,142 3,849 2,103 103,849 4,766 3,020 104,766 5,882 4,136 105,882
7 8,549 4,436 2,740 104,436 5,668 3,972 105,668 7,228 5,532 107,228
8 10,027 4,995 3,349 104,995 6,589 4,943 106,589 8,692 7,046 108,692
9 11,578 5,525 3,929 105,525 7,530 5,934 107,530 10,284 8,688 110,284
10 13,207 6,029 4,699 106,029 8,492 7,162 108,492 12,018 10,688 112,018
15 22,657 8,506 8,506 108,506 14,143 14,143 114,143 24,118 24,118 124,118
20 34,719 10,429 10,429 110,429 20,772 20,772 120,772 43,608 43,608 143,608
25 50,113 11,637 11,637 111,637 28,400 28,400 128,400 75,058 75,058 175,058
30 69,761 11,673 11,673 111,673 36,708 36,708 136,708 125,641 125,641 225,641
</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% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Investment Return Investment Return Investment Return
End of Premiums Contract Cash Death Contract Cash Death Contract Cash Death
Contract Accum at 5% Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year Interest per year Value Value Value
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 502 0 100,502 545 0 100,545 589 0 100,589
2 2,153 1,223 137 101,223 1,348 262 101,348 1,479 394 101,479
3 3,310 1,918 518 101,918 2,172 772 102,172 2,447 1,047 102,447
4 4,526 2,588 888 102,588 3,017 1,317 103,017 3,498 1,798 103,498
5 5,802 3,233 1,437 103,233 3,882 2,086 103,882 4,641 2,845 104,641
6 7,142 3,849 2,103 103,849 4,766 3,020 104,766 5,882 4,136 105,882
7 8,549 4,436 2,740 104,436 5,668 3,972 105,668 7,228 5,532 107,228
8 10,027 4,995 3,349 104,995 6,589 4,943 106,589 8,692 7,046 108,692
9 11,578 5,525 3,929 105,525 7,530 5,934 107,530 10,284 8,688 110,284
10 13,207 6,029 4,699 106,029 8,492 7,162 108,492 12,018 10,688 112,018
15 22,657 8,096 8,096 108,096 13,578 13,578 113,578 23,298 23,298 123,298
20 34,719 9,248 9,248 109,248 18,962 18,962 118,962 40,564 40,564 140,564
25 50,113 9,254 9,254 109,254 24,345 24,345 124,345 67,079 67,079 167,079
30 69,761 7,631 7,631 107,631 29,082 29,082 129,082 107,831 107,831 207,831
</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 (or less if required by
state law), 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 (or less if required by state law).
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 (or less if required by
state law).
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 Indebtedne ss.
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 l imited 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 d eductions 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 Var iable 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, maturity
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 su ch a payment.
Under certain circumstances and in accordance with established administrative
procedures, we will pay death benefit proceeds through Kansas City Life's
Personal Growth Account, an interest bearing account. Proceeds paid through the
Personal Growth A ccount are placed in our general account. Check-writing
privileges are provided in the Personal Growth Account under which the bank that
pays the check will be reimbursed by Kansas City Life out of the proceeds held
in our general account. The Pers onal Growth Account is not a bank account and
is not insured nor guaranteed by the FDIC or any other government agency. A
Contract Owner or beneficiary (whichever applicable) will have immediate access
to the proceeds by writing a check on the accoun t. We pay interest from the
date of death to the date the Personal Growth Account is closed.
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) th e 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 reasonabl y 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 providing updated
information about the Contract since the last report, including any 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 additio n, when you pay premium payments , 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 submiss ion 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 n ot 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: 5-60
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 con tract 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 ear lier 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. DPB benef its 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.
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 ch arges 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 representa tives 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 Kansa s 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 oth er 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 regul ations 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 n ot 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 pre mium 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 t he 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 Contrac t.
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 Li fe 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 C ode (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 t he 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 t he 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 investmen ts 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 re
gulations or rulings on the "extent to which Contract holders 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 Contract owners were not owners of subaccount assets. For example, an
Owner has add itional 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 wha t 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 benefi t under the Contract should be excludable 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 consequence s. 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 s uch 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 shoul d 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 depe nd 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 extremel y 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 t he 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, Kans as 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 notific ation 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 p artial 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 i ncome 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 1/2, is attributable to the Own er'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 be fore 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 unde r 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. A preferred loan may not, however, be treated as
Indebtedness; instead, it may be treated as a distribution.
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. Interest paid on a loan under a Contract
generally is not deductible. 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 inco me 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 secur ed 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 inc ludible 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, h owever, 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 w ho 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-deale rs 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.
When policies are sold through other broker-dealers that have entered into
selling agreements with Sunset Financial Services, the commission which will
be paid by such broker-dealers to their representatives will be in accordance
with their established rules. The commission rates may be more or less than
those set forth above for Kansas City Life's representatives. In addition,
their qualified registered representatives may be reimbursed by the broker-
dealers under expense reimbursement allowance programs in any yea r for
approved voucherable expenses incurred. The broker-dealers will be compensated
as provided in the selling agreements, and Sunset Financial Services, Inc. will
reimburse Kansas City Life for such amounts and for certain other direct
expenses in connection with marketing the Contracts through other
broker-dealers.
Telephone Transfer, Premium Allocation and Loan Privileges
A transfer of Contract Value, change in premium allocation or Contract
loan may be made 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, change in premium allocation,
and loan 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 and loans 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.
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 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 of Old American Insurance
Company, a subsidiary of Kansas City Life.
Charles R. Duffy Jr. Elected Vice President, Insurance Administration in
November, 1989; Senior Account Executive, Cybertek Corporation, January, 1989 to
November, 1989; Senior Vice President, Operations in 1996; responsible for
Computer Information Systems, Customer Services and Claims. 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, 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.
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 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, 1996 and
1995 and the related consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1996,
and the financial statements of the Variable Account for the period from
January 29, 1996 to December 31, 1996, appearing herein have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports thereon
appearing elsewhere herein, and are included herein in reliance upon such
reports 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 qu alification 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, 1996 and
1995, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years in the period ended
December 31, 1996 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. The financial statements of the Variable Account for the
period January 29, 1996 to December 31, 1996, are also included herein.
<TABLE>
Consolidated Income Statement
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
REVENUES
Insurance revenues:
Premiums:
Life insurance $103,263 101,341 103,324
Accident and health 37,575 29,475 30,896
Contract charges 78,755 74,642 69,607
Investment revenues:
Investment income, net 186,743 188,087 173,388
Realized investment gains, net 3,013 4,950 6,060
Other 12,662 10,290 10,179
TOTAL REVENUES 422,011 408,785 393,454
BENEFITS AND EXPENSES
Policy benefits:
Death benefits 87,940 85,388 79,829
Surrenders of life insurance 15,488 16,345 16,490
Other benefits 65,437 53,441 54,146
Increase in benefit and contract reserves 85,614 89,139 83,158
Amortization of policy acquisition costs 30,086 27,992 29,370
Insurance operating expenses 78,121 76,557 73,487
TOTAL BENEFITS AND EXPENSES 362,686 348,862 336,480
Income before Federal income taxes 59,325 59,923 56,974
Federal income taxes:
Current 26,073 22,038 22,845
Deferred (9,063) (3,853) (4,729)
17,010 18,185 18,116
Income before nonrecurring item 42,315 41,738 38,858
Postemployment benefits, net - - 1,481
NET INCOME $ 42,315 41,738 37,377
PER COMMON SHARE
Income before nonrecurring item $6.84 6.76 6.32
Postemployment benefits, net - - .24
NET INCOME $6.84 6.76 6.08
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<TABLE>
Consolidated Balance Sheet
<CAPTION>
<S> <C> <C>
1996 1995
ASSETS
Investments:
Fixed maturities:
Available for sale, at fair value
(amortized cost $1,762,091,000;
$1,604,415,000 -1995) $1,759,153 1,647,674
Held to maturity, at amortized cost
(fair value $256,042,000;
$339,911,000 - 1995) 248,433 320,394
Equity securities available for sale,
at fair value (amortized cost
$71,522,000; $62,352,000 -1995) 79,018 70,837
Mortgage loans on real estate, net 246,493 235,213
Real estate, net 43,750 48,542
Real estate joint ventures 28,356 36,103
Policy loans 94,412 94,312
Short-term 19,642 36,898
TOTAL INVESTMENTS 2,519,257 2,489,973
Cash 4,577 9,612
Accrued investment income 41,847 40,923
Receivables, net 6,854 7,228
Property and equipment, net 24,791 27,866
Deferred acquisition costs 207,020 192,476
Value of purchased insurance in force 38,031 39,084
Reinsurance assets 93,328 89,983
Other 5,089 5,359
Separate account assets 13,916 1,264
$2,954,710 2,903,768
LIABILITIES AND STOCKHOLDERS' EQUITY
Future policy benefits:
Life insurance $ 671,204 658,350
Accident and health 30,356 27,379
Accumulated contract values 1,544,714 1,518,968
Policy and contract claims 35,223 31,919
Other policyholders' funds:
Dividend and coupon accumulations 43,141 42,610
Other 60,970 56,206
Income taxes:
Current 3,537 2,796
Deferred 19,748 43,230
Other 69,037 63,919
Separate account liabilities 13,916 1,264
TOTAL LIABILITIES 2,491,846 2,446,641
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 14,761 13,039
Unrealized gains (losses) on securities
available for sale, net 2,963 29,740
Retained earnings 509,748 477,826
Less treasury stock, at cost
(3,058,871 shares; 3,070,435 shares -1995) (87,729) (86,599)
TOTAL STOCKHOLDERS' EQUITY 462,864 457,127
$2,954,710 2,903,768
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<TABLE>
Consolidated Statement of Stockholders' Equity
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
COMMON STOCK, beginning and end of year $ 23,121 23,121 23,121
PAID-IN-CAPITAL:
Beginning of year 13,039 11,847 10,597
Excess of proceeds over cost of
treasury stock sold 1,722 1,192 1,250
End of year 14,761 13,039 11,847
UNREALIZED GAINS (LOSSES) ON SECURITIES
AVAILABLE FOR SALE:
Beginning of year 29,740 (51,345) 13,501
Unrealized appreciation on cumulative effect
of accounting change, net - - 14,627
Unrealized appreciation (depreciation)
on securities available for sale, net (26,777) 81,085 (79,473)
End of year 2,963 29,740 (51,345)
RETAINED EARNINGS:
Beginning of year 477,826 446,149 417,381
Net income 42,315 41,738 37,377
Stockholder dividends of $1.68 per share
($1.63 - 1995 and $1.40 - 1994) (10,393) (10,061) (8,609)
End of year 509,748 477,826 446,149
TREASURY STOCK, at cost:
Beginning of year (86,599) (86,077) (85,643)
Cost of 27,876 shares acquired
(17,240 shares - 1995 and
17,329 shares - 1994) (1,501) (829) (771)
Cost of 39,440 shares sold
(32,709 shares - 1995
and 35,890 shares - 1994) 371 307 337
End of year (87,729) (86,599) (86,077)
TOTAL STOCKHOLDERS' EQUITY $462,864 457,127 343,695
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<TABLE>
Consolidated Statement of Cash Flows
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 42,315 41,738 37,377
Adjustments to reconcile net income to
net cash from operating activities:
Amortization of investment discount, net (4,071) (5,215) (3,882)
Depreciation 4,995 5,265 5,165
Policy acquisition costs capitalized (38,639) (40,388) (43,952)
Amortization of deferred policy
acquisition costs 30,086 27,992 29,370
Realized investment gains (3,013) (4,950) (6,060)
Changes in assets and liabilities:
Future policy benefits 15,831 15,071 15,747
Accumulated contract values 3,183 8,135 8,445
Other policy liabilities 5,294 3,852 414
Income taxes payable and deferred (8,322) (1,595) (4,784)
Postemployment benefits, net - - 1,481
Other, net 5,886 4,318 2,431
NET CASH FROM OPERATING ACTIVITIES 53,545 54,223 41,752
INVESTING ACTIVITIES
Investments called, matured or repaid:
Fixed maturities available for sale 131,545 136,574 203,640
Fixed maturities held to maturity 79,017 63,433 75,060
Equity securities available for sale 8,899 13,727 27,876
Mortgage loans on real estate 53,430 67,722 35,311
Decrease (increase) in
short-term investments, net 17,256 (17,558) 120,142
Other 10,440 4,884 2,469
Investments sold:
Fixed maturities available for sale 140,372 165,563 51,124
Fixed maturities held to maturity - 4,207 -
Equity securities available for sale 963 18,984 3,488
Investments purchased or originated:
Fixed maturities available for sale (431,916)(495,766)(574,667)
Fixed maturities held to maturity - - (21,533)
Equity securities available for sale (18,071) (12,896) (5,566)
Real estate joint ventures (6,439) (8,093) (5,707)
Mortgage loans on real estate (54,161) (31,053) (8,192)
Other (2,150) (1,068) (1,789)
Net additions to property and equipment (527) (2,918) (1,640)
NET CASH USED IN INVESTING ACTIVITIES (71,342) (94,258) (99,984)
FINANCING ACTIVITIES
Proceeds from borrowings 1,650 22,730 891
Repayment of borrowings (1,650) (22,730) (11,446)
Policyowner contract deposits 164,677 179,135 179,411
Withdrawals of policyowner contract deposits (142,114)(127,347)(107,354)
Cash dividends to stockholders (10,393) (10,061) (8,609)
Disposition of treasury stock, net 592 670 816
NET CASH FROM FINANCING ACTIVITIES 12,762 42,397 53,709
Increase (decrease) in cash (5,035) 2,362 (4,523)
Cash at beginning of year 9,612 7,250 11,773
CASH AT END OF YEAR $ 4,577 9,612 7,250
</TABLE>
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 affect amounts reported in the financial
statements and accompanying notes. Actual results could differ from these
estimates.
Financial Accounting Standards Board (FASB) Statement No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
of," was adopted in January 1996, with no impact to the financial statements.
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 .75 percent to 6.75
percent during 1996 (4.79 percent to 7.00 percent during 1995 and 4.50 percent
to 7.50 percent during 1994).
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 which
increased gross profits above those originally estimated. Calls and realized
gains related to them were negligible in 1995 and 1996. In accordance with
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, or
$.08 a share 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 $5,030,000 ($5,157,000 - 1995 and $5,310,000 - 1994) for accrual
of interest and reduced $6,082,000 ($6,088,000 - 1995 and $6,636,000 - 1994)
for amortization. A 13 percent interest rate was used. Through 1996, total
accumulated accrual of interest and amortization equal $27,583,000 and
$33,052,000, respectively. The percentage of the asset's current carrying
amount which will be amortized in each of the next five years is 7.3 percent
- - 1997 and 1998, 7.4 percent - 1999, 7.6 percent - 2000 and 7.5 percent -
2001. This percentage was 2.7 percent in 1996.
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. 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, 6,188,489 shares (6,173,294 shares - 1995 and
6,152,155 shares - 1994).
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.
1996 1995 1994
Net gain from operations for the year $ 27,345 29,307 29,151
Net income for the year 25,574 29,484 28,324
Unassigned surplus at December 31 284,417 268,239 235,226
Stockholders' equity at December 31 234,570 217,801 184,117
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 1997 without prior approval is $27,345,000. 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 $36,000,000 in 1996 and $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. On that date,
the value of securities available for sale at fair value increased
stockholders' equity $14,627,000, 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 provided 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.
At December 31, 1996, 88 percent of the Company's securities are categorized
as available for sale and are stated at fair value. 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.
<TABLE>
Investment Revenues
Major categories of investment revenues are summarized as follows.
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Investment income:
Fixed maturities $150,421 144,242 127,806
Equity securities 5,503 6,259 7,563
Mortgage loans 23,127 31,378 29,118
Real estate 13,237 12,342 11,732
Policy loans 6,372 6,174 6,295
Short-term 2,353 2,753 4,437
Other 2,222 2,533 2,433
203,235 205,681 189,384
Less investment expenses (16,492) (17,594) (15,996)
$186,743 188,087 173,388
Realized gains (losses):
Fixed maturities $ (1,862) (1,718) 1,995
Equity securities 961 4,634 4,568
Mortgage loans 2,000 (108) -
Real estate 1,894 2,172 300
Other 20 (30) 1
Deferred acquisition cost amortization for
realized investment gains - - (804)
$ 3,013 4,950 6,060
</TABLE>
<TABLE>
Unrealized Gains and Losses
Unrealized gains (losses) on the Company's securities follow.
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Available for sale:
End of year $ 4,558 51,744 (86,601)
Deferred income taxes (1,595) (16,013) 27,661
Effect on deferred acquisition costs - (5,991) 7,595
$ 2,963 29,740 (51,345)
Increase (decrease) in net unrealized gains
during the year:
Fixed maturities $(26,216) 78,876 (55,150)
Equity securities (561) 2,209 (9,696)
$(26,777) 81,085 (64,846)
Held to maturity:
End of year $ 7,609 19,517 2,850
Increase (decrease) in net unrealized gains
during the year $(11,908) 16,667 (65,820)
</TABLE>
<TABLE>
Securities
The amortized cost and fair value of investments in securities at December 31,
1996, follow.
<CAPTION>
Gross
Amortized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Available for sale:
U.S. government bonds $ 144,299 1,633 518 145,414
Public utility bonds 254,875 2,755 3,631 253,999
Corporate bonds 981,157 10,122 17,161 974,118
Mortgage-backed bonds 253,810 6,473 1,532 258,751
Other bonds 114,539 850 2,238 113,151
Redeemable preferred stocks 13,411 419 110 13,720
Total fixed maturities 1,762,091 22,252 25,190 1,759,153
Equity securities 71,522 8,340 844 79,018
$1,833,613 30,592 26,034 1,838,171
Held to maturity:
Public utility bonds $ 138,592 5,619 306 143,905
Corporate bonds 104,713 3,387 1,416 106,684
Other bonds 5,128 325 - 5,453
248,433 9,331 1,722 256,042
$2,082,046 39,923 27,756 2,094,213
</TABLE>
The amortized cost and fair value of investments in securities at December 31,
1995, follow.
<TABLE>
<CAPTION>
Gross
Amortized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
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
</TABLE>
All fixed maturity securities produced income in 1996.
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.
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
<S> <C> <C>
Available for sale:
Due in one year or less $ 39,749 40,037
Due after one year through five years 286,030 290,506
Due after five years through ten years 731,349 722,058
Due after ten years 451,153 447,801
Mortgage-backed bonds 253,810 258,751
$1,762,091 1,759,153
Held to maturity:
Due in one year or less $ 92,171 94,186
Due after one year through five years 68,567 71,624
Due after five years through ten years 37,613 39,314
Due after ten years 50,082 50,918
$ 248,433 256,042
</TABLE>
Sales of investments in securities available for sale in 1996, excluding
normal maturities and calls, follow.
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Proceeds $141,336 184,547 54,612
Gross realized gains 1,400 6,416 1,065
Gross realized losses 1,420 6,527 377
</TABLE>
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, 1996, the Company did 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 $2,077,000
($2,862,000 - 1995). Mortgage loans are carried net of a valuation reserve of
$8,500,000 ($10,500,000 in 1995).
At December 31, 1996 and 1995, the mortgage portfolio is diversified
geographically and by property type as follows.
<TABLE>
<CAPTION>
1996 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Geographic region:
Mountain $ 75,058 76,163 78,843 82,753
Pacific 81,955 82,599 80,334 82,802
West south central 36,155 36,940 35,541 37,483
West north central 35,463 36,003 28,172 29,717
Other 26,362 26,824 22,823 24,233
Valuation reserve (8,500) (8,500) (10,500) (10,500)
$246,493 250,029 235,213 246,488
Property type:
Industrial $136,266 137,633 104,728 109,247
Retail 45,555 46,681 57,246 60,114
Office 54,332 55,280 66,404 69,656
Other 18,840 18,935 17,335 17,971
Valuation reserve (8,500) (8,500) (10,500) (10,500)
$246,493 250,029 235,213 246,488
</TABLE>
As of December 31, 1996, the Company has commitments which expire in 1997 to
originate mortgage loans of $7,253,000.
Mortgage loans foreclosed upon and transferred to real estate investments
during the year equaled $2,977,000 ($4,322,000 - 1995 and $3,391,000 - 1994).
Mortgage loans acquired in the sale of real estate assets during the year
totaled $6,579,000 ($9,571,000 - 1995 and $877,000 - 1994).
Real Estate
Detail concerning the Company's real estate investments follows.
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Penntower office building, at cost:
Land $ 1,106 1,106
Building 17,644 17,543
Less accumulated depreciation (9,303) (8,721)
Foreclosed real estate, at lower of
cost or net realizable value 18,218 22,736
Other investment properties, at cost:
Land 3,370 3,370
Buildings 25,907 24,890
Less accumulated depreciation (13,192) (12,382)
$ 43,750 48,542
</TABLE>
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 $5,227,000 ($7,378,000 - 1995) to
reflect net realizable value.
The Company held non-income producing real estate equaling $758,000 ($931,000
- - 1995).
<TABLE>
PROPERTY AND EQUIPMENT
<CAPTION>
1996 1995
<S> <C> <C>
Land $ 1,029 1,029
Home office buildings 23,131 23,122
Furniture and equipment 24,760 26,382
48,920 50,533
Less accumulated depreciation (24,129) (22,667)
$24,791 27,866
</TABLE>
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.
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.
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $ 7,750 7,233
Fully eligible active plan participants 1,904 1,780
Other active plan participants 5,803 5,844
15,457 14,857
Unrecognized net loss (590) (722)
$14,867 14,135
</TABLE>
The net periodic postretirement benefit cost included the following
components.
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Service cost $ 536 314 379
Interest cost 794 669 535
Net amortization of experience gains - (93) (87)
$1,330 890 827
</TABLE>
The weighted average annual assumed rate of increase in the per capita cost of
covered benefits for the medical plans is 12 percent for 1997, the same as for
1996, and is assumed to decrease gradually to 6 percent in 2005. Increasing
the assumed health care cost growth rates by one percentage point increases
the accrued postretirement benefit costs $2,040,000 and $1,931,000 as of
December 31, 1996 and 1995, respectively. The aggregate service and interest
cost components of the net periodic postretirement benefit cost for 1996 would
increase $268,000. The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 7.75 percent and 7.00
percent at December 31, 1996 and 1995, 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.
1996 1995
Actuarial present value of accumulated benefit
obligation, including vested benefits of
$79,913,000 ($80,212,000 - 1995) $ 86,635 81,769
Projected benefit obligation for service
rendered to date $100,571 96,771
Plan assets at fair value, primarily listed
corporate and U.S. bonds 85,241 85,710
Plan assets less than projected benefit obligation (15,330) (11,061)
Items not yet recognized in earnings:
Net loss from past experience 15,571 13,885
Prior service costs 14 16
Net asset at January 1, 1987,
being recognized over 16 years (1,236) (1,442)
Net prepaid (unfunded) pension costs $ (981) 1,398
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Net pension cost includes:
Service costs - benefits earned during the period $ 3,369 2,403 3,178
Interest cost on projected benefit obligation 6,647 6,156 5,835
Actual return on plan assets (2,951) (14,139) 1,907
Net amortization and deferral (4,547) 7,412 (8,923)
Net periodic pension cost $ 2,518 1,832 1,997
Assumptions were as follows:
Weighted average discount rate 7.75% 7.00 8.50
Weighted average compensation increase 4.50 5.50 5.50
Weighted average expected
long-term return on plan assets 9.00 9.00 9.00
</TABLE>
At December 31, 1996, the Company utilized more recent mortality experience
which caused some increase in the benefit obligations.
No contribution was made to the pension plan in 1996 ($992,000 - 1995 and none
- - 1994).
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 $174,000 ($287,000 -1995 and $111,000 -
1994). The Company also sponsors a non-contributory deferred compensation plan
for eligible agents based upon earned first-year commissions. Contributions
to this plan were $318,000 ($405,000 -1995 and $377,000 - 1994).
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 $2,082,000 ($1,826,000 - 1995 and $1,898,000 - 1994).
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 1994 and 1996.
The Company 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 has
not materially aff ected operating expenses in any year since then.
FEDERAL INCOME TAXES
A reconciliation of the Federal income tax rate and the actual tax rate
experienced is shown below.
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Federal income tax rate 35% 35 35
Special tax credits (5) (4) (2)
Other permanent differences (1) (1) (1)
Actual income tax rate 29% 30 32
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below.
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Deferred tax assets:
Future policy benefits $ 46,518 43,906
Employee retirement benefits 13,055 11,598
Other 5,176 3,073
Gross deferred tax assets 64,749 58,577
Deferred tax liabilities:
Capitalization of policy acquisition
costs, net of amortization 49,175 47,321
Basis differences between tax and
GAAP accounting for investments 20,093 38,933
Property and equipment, net 1,770 2,073
Value of insurance in force 11,790 12,116
Other 1,669 1,364
Gross deferred tax liabilities 84,497 101,807
Net deferred tax liability $ 19,748 43,230
</TABLE>
Federal income taxes paid for the year were $25,332,000 ($19,981,000 - 1995
and $22,684,000 - 1994).
Policyholders' 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
policyholders' 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 policyholders' 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
1996 this shareholders' surplus was $340,549,000 for Kansas City Life,
$62,740,000 for Sunset Life and $38,544,000 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 invest ment risks are assumed by the policyholders. 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 policyholders 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.
<TABLE>
REINSURANCE
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Life insurance in force (in millions):
Direct $ 22,180 20 991 19 988
Ceded (2,742) (2 442) (2 073)
Assumed 28 33 36
Net $ 19,466 18 582 17 951
Premiums:
Life insurance:
Direct $127,150 124,504 126,652
Ceded (24,380) (23,292) (23,538)
Assumed 493 129 210
Net $103,263 101,341 103,324
Accident and health:
Direct $ 48,694 42,971 42,709
Ceded (11,370) (13,496) (11,956)
Assumed 251 - 143
Net $ 37,575 29,475 30,896
</TABLE>
Contract charges arise generally from directly issued business. Ceded benefit
recoveries were $37,829,000 ($27,613,000 - 1995 and $27,365,000 - 1994).
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, 1996, these policies had a face
value of $148,430,000. The reserve for future policy benefits ceded under this
agreement was $52,556,000 ($53,649,000 - 1995).
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 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. Fair values for mortgage loans are based upon discounted cash
flow analyses using an interest rate assumption 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.
<TABLE>
<CAPTION>
1996 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Investments:
Securities available for sale $1,838,171 1 838,171 1,718,511 1 718,511
Securities held to maturity 248,433 256,042 320,394 339,911
Mortgage loans 246,493 250,029 235,213 246,488
Liabilities:
Individual and group annuities 862,605 829,261 871,340 842,809
Supplementary contracts without
life contingencies 21,835 21,835 23,343 23,343
</TABLE>
The Investments Note provides further details regarding the investments above.
QUARTERLY CONSOLIDATED FINANCIAL DATA (unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
<S> <C> <C> <C> <C>
1996:
Total revenues $106,868 102,088 105,677 107,377
Operating income $ 11,933 10,002 8,643 9,777
Realized gains, net 614 (308) 671 982
Net income $ 12,547 9,694 9,314 10,759
Per common share:
Operating income $ 1.93 1.62 1.39 1.58
Realized gains, net .10 (.05) .11 .16
Net income $ 2.03 1.57 1.50 1.74
1995:
Total revenues $ 98,733 100,356 103,041 106,656
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
</TABLE>
CONTINGENT LIABILITY
In January 1996, a division of the Oklahoma Appellate Court issued an opinion
reducing a prior $10,700,000 judgment against the Company to $1,300,000 which
the Company has accrued. The case arose out of certain actions by one of the
Company's agents. In November 1996, an Oklahoma District Court Judge ruled
that the Company was also responsible for $2,500,000 of a judgment rendered
against the agent in the same case. The Company believes that the court's
ruling violates the Company's rights and guarantees under the Oklahoma and
Federal Constitutions as well as Oklahoma common and statutory law. The
Oklahoma Supreme Court has agreed to hear the Company's appeal. 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 lawsuits involving claims and disputes with policyholders that
may 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 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.
Report of Independent Auditors
To the Board of Directors and Stockholders
of Kansas City Life Insurance Company
We have audited the accompanying consolidated balance sheet of Kansas City
Life Insurance Company (the Company) as of December 31, 1996 and 1995 and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1996. 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 respects, the consolidated financial position
of Kansas City Life Insurance Company at December 31, 1996 and 1995 and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
As discussed in the Notes to the consolidated financial statements, the
Company changed its method of accounting for investments and postemployment
benefits in 1994.
Kansas City, Missouri
January 27, 1997
Kansas City Life Variable Life Separate Account
Balance Sheet
December 31
Assets 1996
Investments: (in thousands)
Federated Advisors -Federated Insurance Series
American Leaders Fund II - 4,290 shares at net asset
value of $15.26 per share (cost $60,000) $ 65
High Income Bond Fund II - 3,880 shares at net asset value of
$10.24 per share (cost $39,000) 40
Prime Money Fund II - 145,938 shares at net asset value of
$1.00 per share (cost $146,000) 146
Massachusetts Financial Services - MFS Variable Insurance Trust
Research Series - 20,263 shares at net asset value of $13.13 per
share (cost $253,000) 266
Emerging Growth Series - 24,465 shares at net asset value of
$13.24 per share (cost $322,000) 324
Total Return Series - 6,118 shares at net asset value of $13.71
per share (cost $80,000) 84
Bond Series - 1,916 shares at net asset value of $10.06 per
share (cost $19,000) 19
World Governments Series - 1,070 shares at net asset value of
$10.58 per share (cost $11,000) 11
Utilities Series - 3,794 shares at net asset value of $13.66 per
share (cost $51,000) 52
American Century, Inc. - TCI Portfolios
Growth - 12,180 shares at net asset value of $10.24 per
share (cost $129,000) 125
International - 12,745 shares at net asset value of $5.96
per share (cost $72,000) 76
Total Assets $1,208
See accompanying Notes to Financial Statements
Kansas City Life Variable Life Separate Account
Balance Sheet
(continued)
December 31
1996
Net Assets (in thousands)
Federated Advisors -Federated Insurance Series
American Leaders Fund II - 5,545 units at a unit
value of $11.81 per unit $ 65
High Income Bond Fund II - 3,559 units at a unit
value of $11.16 per unit 40
Prime Money Fund II - 14,101 units at a unit value
of $10.35 per unit 146
Massachusetts Financial Services - MFS Variable Insurance Trust
Research Series - 21,932 units at a unit value of
$12.13 per unit 266
Emerging Growth Series - 27,889 units at a unit
value of $11.61 per unit 324
Total Return Series - 7,396 units at a unit value
of $11.34 per unit 84
Bond Series - 1,900 units at a unit value of
$10.14 per unit 19
World Governments Series - 1,092 units at a unit value
of $10.37 per unit 11
Utilities Series - 4,438 units at a unit value of
$11.68 per unit 52
American Century, Inc. - TCI Portfolios
Growth - 12,721 units at a unit value of
$9.80 per unit 125
International - 6,695 units at a unit value of
$11.34 per unit 76
Total Net Assets $ 1,208
See accompanying Notes to Financial Statements
<TABLE>
Kansas City Life Variable Life Separate Account
Statement of Operations and Changes in Net Assets
Period from January 29, 1996 (inception) to December 31, 1996
(in thousands)
<CAPTION>
Federated Insurance Series MFS VariableInsurance Trust TCI Portfolios
High
American Income Prime Emerging Total World
Leaders Bond Money Research Growth Return Bond Gov'ts Utilities
Fund II Fund II Fund II Series Series Series Series Series Series Growth Int'l Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividend Distributions $ - 1 5 - - 1 1 1 1 - - 10
Capital Gains Distributions - - - 4 3 1 - - 3 - - 11
Realized Gain (Loss) on Investments - - - - - - - - - - - -
Unrealized Appreciation
(Depreciation) on Investments 5 1 - 13 2 4 - - 1 (4) 4 26
Net Investment Income 5 2 5 17 5 6 1 1 5 (4) 4 47
Expenses:
Mortality and Expense Fees - - 1 1 1 - - - - - - 3
Contract Expense Charges 5 4 62 22 33 5 3 3 4 12 8 161
Expenses 5 4 63 23 34 5 3 3 4 12 8 164
Increase (Decrease) in Net
Assets from Operations - (2) (58) (6) (29) 1 (2) (2) 1 (16) (4) (117)
Deposits 12 12 1,019 73 105 11 9 6 14 44 25 1,330
Payments and Withdrawals:
Withdrawals - (2) - - - - (3) - - - - (5)
Transfers In (Out) 53 32 (815) 199 248 72 15 7 37 97 55 -
Total Payments and Withdrawals 53 30 (815) 199 248 72 12 7 37 97 55 (5)
Net Assets:
Net Increase 65 40 146 266 324 84 19 11 52 125 76 1,208
Beginning of Period - - - - - - - - - - - -
End of Year $ 65 40 146 266 324 84 19 11 52 125 76 1,208
</TABLE>
See accompanying Notes to Financial Statements
Notes to Financial Statements
1. Organization and Significant Accounting Policies
Organization
Kansas City Life Variable Life Separate Account, marketed as Century II Variable
Universal Life, (the Account) is a separate account of Kansas City Life
Insurance Company (KCL). The Account is registered as a unit investment trust
under the Investment Company Act of 1940, as amended. Deposits were first
received into the Account in January 1996. All deposits received by the Account
have been directed by the contract owners into subaccounts of three series-type
mutual funds, as listed below, or into KCL's Fixed Account.
Federated Insurance Series
American Leaders Fund II Long-term growth of capital
High Income Bond Fund II High current income
Prime Money Fund II Current income with stability of principal and
liquidity
MFS Variable Insurance Trust
MFS Research Series Long-term growth of capital and future income
MFS Emerging Growth Series Long-term growth of capital
MFS Total Return Series Income and opportunities for growth of capital
and income
MFS Bond Series Current income and protection of shareholders'
capital
MFS World Governments Series Preservation and growth of capital with moderate
current income
MFS Utilities Series Capital growth and current income
TCI Portfolio, Inc.
TCI Growth Capital growth through investment in common
stocks
TCI International Capital growth through investment in foreign
securities
Basis of Presentation and Use of Estimates
The inception date of the plan was January 29, 1996. The preparation of
financial statements requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results c ould differ from those estimates.
Reinvestment of Dividends
Interest and dividend income and capital gains distributions paid by the mutual
funds to the Account are reinvested in additional shares of each respective
subaccount. Capital gains distributions are
recorded as income on the date of receipt.
Notes to Financial Statements (continued)
Federal Income Taxes
Under current law, no Federal income taxes are payable with respect to the
Account.
Investment Valuation
Investments in mutual fund shares are carried in the balance sheet at quoted
market value (net asset value of the underlying mutual fund). The average cost
method is used to determine gains and losses.
The aggregate purchases and proceeds from sales, and the related number of
shares involved, are shown below for the period from January 29, 1996
(inception) to December 31, 1996.
Cost of Proceeds Shares
Purchases from Sales Purchased Sold
(in thousands)
American Leaders Fund II $ 69 9 4,936 646
High Income Bond Fund II 59 20 5,946 2,066
Prime Money Fund II 1,354 1,208 1,353,623 1,207,685
MFS Research 338 85 26,925 6,662
MFS Emerging Growth Series 425 103 32,224 7,759
MFS Total Return Series 91 11 6,949 831
MFS Bond Series 26 7 2,573 657
MFS World Governments Series 15 4 1,491 421
MFS Utilities Series 83 32 6,138 2,344
TCI Growth 156 27 14,700 2,520
TCI International 88 16 15,517 2,772
2. Accumulation Unit Value
The unit values and the number of units outstanding for each subaccount follow.
Unit Value Number of
as of Units as of
December 31 January 29 December 31
1996 1996 1996
American Leaders Fund II $11.81 10.00 5,545
High Income Bond Fund II 11.16 10.00 3,559
Prime Money Fund II 10.35 10.00 14,101
MFS Research Series 12.13 10.00 21,932
MFS Emerging Growth Series 11.61 10.00 27,889
MFS Total Return Series 11.34 10.00 7,396
MFS Bond Series 10.14 10.00 1,900
MFS World Governments Series 10.37 10.00 1,092
MFS Utilities Series 11.68 10.00 4,438
TCI Growth 9.80 10.00 12,721
TCI International 11.34 10.00 6,695
Notes to Financial Statements (continued)
3. Variable Life Contract Charges
KCL deducts an administrative fee for each contract of $26 per month for the
first 12 months and $6 per month thereafter. A deduction for insurance costs
also is made monthly and is based on the insured's attained age, sex, rating
class and policy v alue. Mortality and expense risks assumed by KCL are
compensated for by a fee equivalent to an annual rate of 0.9 percent of the
asset value of each contract.
Premium taxes of 2.25 percent of premium receipts are deducted from these
receipts prior to their transfer to the separate accounts. Other charges are
deducted from each contract when certain events occur, such as the seventh fund
transfer in a cont ract year or the second transfer of funds from the Fixed
Account in a contract year.
A contingent deferred sales charge is assessed against certain withdrawals
during the first fifteen years of the contract. During 1996, there were no
surrender charges and other contract charges totaled $164,000.
Report of Independent Auditors
The Contract Owners of Kansas City Life Variable
Life Separate Account and The Board of Directors
of Kansas City Life Insurance Company
We have audited the accompanying balance sheet of Kansas City Life Variable
Life Separate Account (the Company) as of December 31, 1996, and the related
statement of operations and changes in net assets for the period from January
29, 1996 (inception) to December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit 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. Our
procedures included confirmation of investments owned as of December 31, 1996
by correspondence with the custodians. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kansas City Life Variable Life
Separate Account at December 31, 1996, and the results of its operations and
changes in its net assets for the period from January 29, 1996 (inception) to
December 31, 1996, in conformity with generally accepted accounting principles.
Ernst & Young LLP
March 25, 1997
Supplement Dated September 10, 1996,
to Prospectus Dated May 1, 1996
Kansas City Life Variable Life Separate Account
Variable Universal Life Contract
Maryland
For contracts sold in the state of Maryland, the prospectus is supplemented
as follows:
The definitions for "No-Lapse Monthly Premium" and "No-Lapse Payment Period"
are added to page 6 of the prospectus and are as follows:
No-Lapse Monthly Premium - An amount used to measure premium payments paid
for purpose of determining whether the guarantee that your Contract will not
lapse during the No-Lapse Payment Period is in effect.
No-Lapse Payment Period - The period of time during which we guarantee that
your Contract will not lapse if the No Lapse Monthly Premiums are paid.
The following wording is added after the "Guaranteed Payment Period and
Guaranteed Monthly Premium" section of the prospectus on page 19:
No-Lapse Monthly Premium and No-Lapse Payment Period - In addition to the
Guaranteed Payment Period described above, there is a fifteen year No-Lapse
Payment Period. A No-Lapse 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 No-Lapse Monthly Premiums in effect on each prior Monthly
Anniversary Date, and (2) an amount equal to the sum of any partial surrenders
taken and Indebtedness under the Contract. The No-Lapse Payment Periods are
fifteen years following the Contract Date and fifteen years following the
effective date of an increase in the Specified Amount. The No-Lapse Monthly
Premium is shown in the Contract. The per $1,000 No Lapse 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 No-Lapse Monthly Premium. However, upon a change
to the Contract, Kansas City Life will recalculate the No-Lapse Monthly
Premium and will notify you of the new No-Lapse Monthly Premium and amend
your Contract to reflect the change.
The following paragraph is added to the "Premium Payments Upon Increase in
Specified Amount" section on page 19 of the prospectus:
A new No-Lapse Payment Period begins on the effective date of an increase in
Specified Amount. You will be notified of the new No-Lapse Monthly Premium
for this period.
The "After the Guaranteed Payment Period" section on page 20 of the prospectus
is deleted and replaced with the following:
After the Guaranteed Payment Period but during the No-Lapse 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 Date are less than required
to guarantee the Contract will not lapse during the No-Lapse Payment Period.
After the No-Lapse 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.
The following paragraph is added to the "Changes in Specified Amount" section
on page 30 of the prospectus:
In addition, a new No-Lapse Payment Period will begin on the effective date
of the increase and will continue for fifteen years. The Contract's No-Lapse
Monthly Premium will be recalculated to reflect the increase. If a No-Lapse
Payment Period is in effect, the Contract's No-Lapse Monthly Premium will also
generally be increased. See "No-Lapse Monthly Premium and No-Lapse Payment
Period" above.
The "Special Transfer Right" shown on page 21 of the prospectus is deleted and
replaced with the following:
Right to Exchange - 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 Right
to Exchange by requesting that this Contract be exchanged for any flexible
premium fixed benefit policy we offer for exchange on the Contract Date.
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 RELATING TO FEES AND CHARGES
Kansas City Life Insurance Company hereby represents that the fees and charges
deducted under the contracts described in the post-effective amendment are, in
the aggregrate, reasonable in relationship to the services rendered, the
expenses expected to be incurred, and the risks assumed by Kansas City Life
Insurance Company.
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 relating to fees and charges.
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.*
(d) Agreement between Kansas City Life Insurance Company and
each of Dreyfus Variable Investment Fund, The Dreyfus Socially Responsible
Growth Fund, Inc., and The Dreyfus Life and Annuity Index Fund, Inc.
(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.
______________________
* 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.
**** Incorporated herein by reference to the Form S-6 Registration Statement
(File No. 33-95354) filing for Kansas City Life Variable Life Separate Account
filed on April 18, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Kansas City Life
Insurance Company certifies that it meets all of the requirements of Securities
Act Rule 485(b) for effectiveness of this Post-Effective Amendment to
its Registration Statement and has duly caused this Post-Effective Amendment
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 28th day of April, 1997.
[SEAL] Kansas City Life Insurance Company
Attest /s/ C. John Malacarne By: /s/ W. E. Bixby
C. John Malacarne W. E. Bixby, President
Pursuant to the requirements of the Securities Act of 1933, Post-Effective
Amendment No. 2 to the Registraton 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 28, 1997
W. E. Bixby President, CEO, and Director
(Principal Executive Officer)
/s/ Richard L. Finn Senior Vice President, Finance April 28, 1997
Richard L. Finn Director
(Principal Financial Officer)
/s/ John K. Koetting Vice President and Controller April 28, 1997
John K. Koetting (Principal Accounting Officer)
/s/ R. Philip Bixby Senior Vice President, Operations April 28, 1997
R. Philip Bixby and Director
/s/Daryl D. Jensen Director April 28, 1997
Daryl D. Jensen
/s/ Francis P. Lemery Director April 28, 1997
Francis P. Lemery
/s/ C. John Malacarne Director April 28, 1997
C. John Malacarne
/s/ Jack D. Hayes Director April 28, 1997
Jack D. Hayes
/s/ J. R. Bixby Director April 28, 1997
J.R. Bixby
___________________ Director April , 1997
Webb R. Gilmore
___________________ Director April , 1997
Warren J. Hunzicker, M.D.
___________________ Director April , 1997
Michael J. Ross
___________________ Director April ,1997
E. Larry Winn, Jr.
/s/ Nancy Bixby Hudson Director April 28, 1997
Nancy Bixby Hudson
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 1997
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, level of specified amount, 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 and same band for cost of insurance
rates. 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 t the 1st of
the next following month. For 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 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
of 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., monthly, quarterly, 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 fourteen 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"),
American Century Variable Portfolios Inc. ("American Century Variable
Portfolios), Federated Insurance Series, Dreyfus Variable Investment Fund and
Dreyfus Stock Index Fund. 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, American Century Variable Portfolios, Federated
Insurance Series, Dreyfus Variable Investment Fund and Dreyfus Stock Index Fund
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 Transfer, Premium Allocation Changes and Loan Privileges
1. Election of the Program. Transfers, changes in premium allocation and
loan requests 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, premium allocation and/or loan
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,
Premium Allocation Changes and Loan Privileges 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, premium allocation changes and loans 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
or the date The Owner requests. 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. If the Contract
Value is negative at the time portfolio rebalancing is scheduled, the re-
distribution will not be completed.
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.
The Deferred Sales Load is calculated separately for the
Initial Specified Amount and any increase in Specified Amount.
Net Premiums paid after each increase will be allocated to the
initial Specified Amount and each increase made. 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.
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.
Under certain circumstances and in accordance with established administrative
procedures, we will pay death benefit proceeds through Kansas City Life's
Personal Growth Account, an interest bearing account. Proceeds paid through the
Personal Growth Account are placed in our general account. Check-writing
privileges are provided in the Personal Growth Account under which the bank that
pays the check will be reimbursed by Kansas City Life out of the proceeds held
in our general account. The Personal Growth Account is not a bank account and
is not insured nor guaranteed by the FDIC or any other government agency. A
Contract Owner or beneficiary (whichever applicable) will have immediate access
to the proceeds by writing a check on the account. We pay interest from the
date of death to the date the Personal Growth Account is closed.
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. We reserve the right to require that the
Contract be in force for one Contract Year before any change in Coverage Option
and that no more than one change in Coverage Option be made in any 12-month
period. 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. We reserve the right to require
that the Contract be in force for one Contract Year before a change in Specified
Amount and we reserve the right to only allow one change in Specified Amount
every 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. Kansas City Life will
calculate the portion of the premium that is attributable to the
Specified Amount increase in accordance with SEC regulations.
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%. Interest earned on the Loan Account will be added to 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, level of specified amount, 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. Contracts with a
specified amount of $500,000 and above currently are subject to a lower level of
cost of insurance charges.
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 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.
Reduced Charges for Eligible Groups
The charges otherwise applicable may be reduced with respect to Contracts issued
to a class of associated individuals or to a trustee, employer or similar entity
where Kansas City Life anticipates that the sales to the members of the class
will result in lower than normal sales or administrative expenses. These
reductions will be made in accordance with our rules in effect at the time of
the application for a Contract. The factors we will consider in determining the
eligibility of a particular group for reduced charges and the level of the
reduction are as follows: the nature of the association and it organizational
framework, the method by which sales will be made to the members of the class,
the facility with which premiums will be collected from the associated
individuals and the association capabilities with respect to administrative
tasks, the anticipated persistency of the Contract, the size of the class of
associated individuals and the number of years it has been in existence and any
other such circumstances which justify a reduction in sales or administrative
expenses. Any reduction will be reasonable and will apply uniformly to all
prospective Contract purchases in the class and will not be unfairly
discriminatory to the interest of any Contract holder.
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. DPB 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.
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.
Exhibit 2
April 28, 1997
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 Account"), 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 contracts, 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
advise 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 wherever appearing herein.
Yours very truly,
/s/C. John Malacarne
C. John Malacarne
CJM/jp
Exhibit 6
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. 2 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 contract (the "Registration Statement") and
The preparation on contract forms for the flexible premium variable life
insurance contracts described in the Registration Statement (the "Contract").
It is my professional opinion that:
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 illustrated 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 Independent Auditors
We consent to the reference to our firm under the caption "Experts", to the
use of our report dated January 27, 1997, with respect to the consolidated
financial statements of Kansas City Life Insurance Company and to the use of
our report dated March 26, 1997 with respect to the financial statements of
Kansas City Life Variable Life Separate Account, included in the Post-
effective Amendment No. 2 to the Registration Statement (Form S-6 No. 33-
95354) and the related Prospectus.
Ernst & Young LLP
Kansas City, Missouri
April 28, 1997
Exhibit 7 (b)
Consent of Sutherland, Asbill & Brennan
April 29, 1997
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. 2 to
Form S-6 for Kansas City Life Variable Life Separate Account. 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
