As filed with the Securities and Exchange Commission on January 29, 1999.
Registration No. 33-95354
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 4 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, LLP
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,
1998 pursuant to paragraph (b) of Rule 485 ___ 60 days after filing pursuant to
paragraph (a)(1) of Rule 485 ___ on April 19, 1999 pursuant to paragraph (a) of
Rule 485
Title of securities being registered: Individual Flexible Premium Variable Life
Insurance Contracts
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 ( "Contract") offered by Kansas City Life Insurance Company . We have
provided a glossary of terms at the end of this Prospectus for your reference as
you read.
The Contract is designed to provide insurance protection on the person named.
The Contract also provides you the opportunity to allocate your premiums to one
or more divisions ("Subaccounts") of the Kansas City Life Variable Life Separate
Account ( "Variable Account") or another account. The assets of each Subaccount
are invested in a corresponding portfolio of a designated mutual fund ("Funds")
as follows:
MFS(R) Variable Insurance TrustSM Manager
MFS Emerging Growth Series Massachusetts Financial
MFS Research Series Services 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 the Funds describe these portfolios. The value
of amounts allocated to the Variable Account (prior to the date the Contract
matures) will vary according to the investment performance of the Portfolios of
the Funds. You bear the entire investment risk of amounts allocated to the
Variable Account. Another choice available for allocation of premiums is our
Fixed Account. The Fixed Account is part of Kansas City Life's general account.
It pays interest at declared rates guaranteed to equal or exceed 4%.
The Contract also offers you the flexibility to vary the amount and timing of
premium payments and to change the amount of Death Benefits payable . This
flexibility allows you to provide for your changing insurance needs under a
single insurance contract.
You can select from two Coverage Options available under the Contract: o Option
A: a level Death Benefit; and o Option B: a Death Benefit that fluctuates with
the value of the Contract. We guarantee that the Death Benefit proceeds will
never be less than a specified amount of insurance (less any outstanding loans
and past due charges) as long as you pay sufficient premiums to keep the
Contract in force.
The Contract provides for a value that you can receive by surrendering the
Contract. There is no guaranteed minimum value. If the value is insufficient to
cover the charges due under the Contract, the Contract will lapse without value.
It may not be advantageous to replace existing insurance. Within certain limits,
you may return the Contract or exercise a special transfer right.
This Prospectus and the accompanying Fund prospectuses provide important
information you should have before deciding to purchase a Contract. Please keep
these for future reference.
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).
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
This Prospectus is Dated is May 1, 1999
<PAGE>
PROSPECTUS CONTENTS
SUMMARY AND DIAGRAM OF THE CONTRACT..........................................5
DIAGRAM OF THE CONTRACT........................................7
Kansas City Life Insurance Company.....................................11
Kansas City Life Variable Life Separate Account........................11
The Funds..............................................................11
Federated Insurance Series..................................................12
Resolving Material Conflicts...........................................13
Addition, Deletion or Substitution of Investments......................14
Voting Rights..........................................................14
Applying for a Contract................................................15
Free Look Right to Cancel Contract.....................................16
PREMIUM PAYMENTS AND ALLOCATIONS............................................16
Premiums 16
Premium Payments to Prevent Lapse......................................18
Premium Allocations and Crediting......................................18
Transfer Privilege.....................................................19
Dollar Cost Averaging Plan.............................................19
Portfolio Rebalancing Plan.............................................20
FIXED ACCOUNT...............................................................20
Minimum Guaranteed and Current Interest Rates..........................20
Calculation of Fixed Account Value.....................................21
Delay of Payment.......................................................21
CHARGES AND DEDUCTIONS......................................................21
Premium Expense Charge.................................................21
Monthly Deduction......................................................21
Daily Mortality and Expense Risk Charge................................23
Transfer Processing Fee................................................23
Surrender Charge.......................................................23
Partial Surrender Fee..................................................24
Fund Expenses..........................................................24
Reduced Charges for Eligible Groups....................................25
Other Tax Charge.......................................................25
HOW YOUR CONTRACT VALUES VARY..........................................25
Bonus on Contract Value in the Variable Account........................25
Determining the Contract Value.........................................25
Cash Surrender Value...................................................26
DEATH BENEFIT AND CHANGES IN SPECIFIED AMOUNT..........................27
Amount of Death Benefit Proceeds.......................................27
Coverage Options.......................................................27
Initial Specified Amount and Coverage Option...........................27
Changes in Coverage Option.............................................27
Changes in Specified Amount............................................28
Selecting and Changing the Beneficiary.................................29
CASH BENEFITS..........................................................29
Contract Loans.........................................................29
Surrendering the Contract for Cash Surrender Value.....................30
Partial Surrenders.....................................................30
Maturity Benefit.......................................................31
Payment Options........................................................31
Specialized Uses of the Contract.......................................32
ILLUSTRATIONS...............................................................32
OTHER INFORMATION ABOUT THE CONTRACTS AND KANSAS CITY LIFE..................49
Sale of the Contracts..................................................49
Telephone Transfer, Premium Allocation and Loan Privileges.............50
Kansas City Life Directors and Executive Officers......................50
State Regulation.......................................................52
Additional Information.................................................52
Experts 52
Litigation.............................................................52
Preparing for Year 2000................................................52
Legal Matters..........................................................53
Financial Statements...................................................53
GLOSSARY OF TERMS...........................................................53
You should rely only on the information contained in this document or that we
have referred you to. We have not authorized anyone to provide you with
information that is different.
<PAGE>
SUMMARY AND DIAGRAM OF THE CONTRACT
The following summary of Prospectus information and diagram provide an overview
of the Contract. Please read it along with the more detailed information which
follows in this Prospectus and the Contract.
Who Should Purchase a Contract. The Contract is designed to provide long-term
insurance benefits and may also provide long-term accumulation of value. You
should evaluate the Contract in conjunction with other insurance policies that
you own and you should consider your insurance needs and the Contract's
long-term investment potential. It may not be an advantage to you to replace
existing insurance coverage with this Contract. You should carefully consider
replacement especially if the decision to replace existing coverage is based
solely on a comparison of illustrations. (See "Illustrations" below and
"Specialized Uses of the Contract" on page 36.)
The Contract. The Contract is an individual flexible premium variable life
insurance contract. As long as it remains in force it provides lifetime
insurance protection on the Insured until the Maturity Date. You pay premiums
for insurance coverage. The Contract also provides for accumulation of premiums
and a value if the Contract terminates. The value during the early years of the
Contract is likely to be much lower than the premiums paid.
The Death Benefit may and the value of the Contract will increase or decrease to
reflect the investment performance of the Subaccounts to which you allocate
premiums. There is no guaranteed minimum value. We do guarantee to keep the
Contract in force during the first five years of the Contract and during the
five years following the effective date of an increase in the Specified Amount
as long as you meet a premium requirement. (See "Guaranteed Payment Period and
Guaranteed Monthly Premium," page 17.) If the value is not enough to pay charges
due, the Contract will lapse without value after a Grace Period. (See "Premium
Payments to Prevent Lapse," page 18.) The Contract also permits loans and
partial surrenders, within limits. If a Contract lapses while loans are
outstanding, adverse tax consequences may result. (See "Tax Considerations,"
page 46.)
Free Look Right to Cancel. For a limited time, you have the right to cancel
your Contract and receive a refund. (See "Free Look Right to Cancel Contract,"
page 16.) During this "free-look" period, we will allocate premiums to the
Federated Prime Money Fund II Subaccount for 30 days. (See "Premium Allocations
and Crediting," page 18.) For a limited time after requesting an increase in the
Contract's amount of insurance coverage, you may cancel the increase and you may
be entitled to a refund of certain charges.
Special Transfer Right. The special transfer right allows to you convert
the Contract to one that provides benefits that don't vary based on the
performance of Funds. Once within the first 24 months of the Contract or within
24 months following the effective date of an increase in Specified Amount, you
may transfer all or a portion of the value in the Variable Account 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 19.)
Illustrations. Illustrations in this Prospectus or those 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 don't show past or
future performance. Actual rates of return may be higher or lower than those
shown in Contract illustrations. Actual Contract values will be different from
those illustrated.
The illustrations show Contract values based on both current charges and
guaranteed charges. (See "Illustrations," page 32.) Illustrated Contract Values
in the illustrations based on current charges reflect a bonus that we may credit
beginning in the eleventh Contract Year. The bonus is not guaranteed and we pay
it at our sole discretion.
Contract Tax Compliance. We intend for the Contract to satisfy the
definition of a life insurance contract under Section 7702 of the Internal
Revenue Code. Under certain circumstances, a federal tax law views a Contract as
a "modified endowment contract." Violation of the definition of life insurance
and/or designation as a "modified endowment contract" will affect the tax
advantages offered under this Contract. We 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. See "Tax
Considerations," page 46 for further discussion of the tax status of a Contract
and the tax consequences.
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.
<PAGE>
DIAGRAM OF THE CONTRACT
PREMIUM PAYMENTS
o You select a payment plan (Planned Premium Payment), but you are not
required to pay premium payments according to the plan. You can vary the
amount and frequency of the planned premium payments and can skip planned
premium payments. (See page 16 for rules and limits.)
o 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, and any supplemental and/or rider benefits.
o You may pay unplanned premium payments, within limits. (See page 17.)
o Under certain circumstances, which include taking excessive Contract loans,
you may have to make extra premium payments to prevent lapse. (See page
18.)
DEDUCTIONS FROM PREMIUM PAYMENTS
o We deduct a premium expense charge of 2.25% of all premium payments to
cover any state or local premium taxes and administrative expenses. (See page
21.)
ALLOCATION OF PREMIUM PAYMENTS
o You direct the allocation of premium Payments among 14 Subaccounts of the
Variable Account and/or the Fixed Account. We apply premiums to your
Contract after deducting the premium expense charge. See page 18 for rules
and limits on premium allocations.
o Each Subaccount invests in a corresponding portfolio of the Funds. While
the Contract is in effect, the Contract Value will vary according to the
investment performance of the Portfolio's of the Funds.
o We credit amounts allocated to the Fixed Account at interest rates
guaranteed to equal or exceed 4%. See page 20 for rules and limits on
transfers from the Fixed Account allocations.
DEDUCTIONS FROM CONTRACT VALUE
o There is a Monthly deduction for cost of insurance, monthly expense charge,
and charges for any supplemental and/or rider benefits. The monthly expense
charge is 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 21.)
DEDUCTIONS FROM ASSETS
o There is a daily charge at a guaranteed maximum annual rate of 0.90% from
the Subaccounts for mortality and expense risks. (See page 23.) We don't
deduct this charge from the Fixed Account Value.
o Management fees and other expenses are deducted from the assets of each
Portfolio before calculation of Subaccount values. (See page 24.) The
following tables should assist you in understanding the fund expenses that
you will bear. 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.
<TABLE>
<CAPTION>
MFS
MFS MFS World
Emerging MFS Total MFS Governments MFS
Growth Research Return Utilities Series Bond
Series Series Series Series Series
<S> <C> <C> <C> <C> <C> <C>
MFS(R) Variable Insurance TrustSM Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) XX% XX% XX% XX% XX% XX%
Other Expenses (after any expense XX% XX% XX% XX% XX% XX%
Reimbursement)1/ 2/ _______ _______ ______ _______ _______ ______
Total Fund Annual Expenses 1/ XX% XX% XX% XX% XX% XX%
</TABLE>
<TABLE>
<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) XX% XX%
Other Expenses XX% XX%
------- -------
Total Fund Annual Expenses3/ XX% XX%
</TABLE>
<TABLE>
<CAPTION>
Federated Federated Federated
American Leaders High Income Prime
Fund II Bond 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) XX% XX% XX%
Other Expenses (after any expense reimbursement) XX% XX% XX%
------- ------- -------
Total Fund Annual Expenses4/ XX% XX% XX%
</TABLE>
<TABLE>
<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) XX% XX%
Other Expenses (after any expense reimbursement) XX% XX%
------- -------
Total Fund Annual Expenses XX% XX%
</TABLE>
Dreyfus Stock
Index Fund
Dreyfus Stock Index Fund Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) XX%
Other Expenses (after any expense reimbursement) XX%
-------
Total Fund Annual Expenses XX%
- --------------------------
1/ The investment adviser to MFS Variable Insurance Trust has agreed to
bear expenses for each Series, subject to reimbursement by each Series,
such that each Series' "Other Expenses" shall not exceed the following
percentages of the average daily net assets of the Series during the
current fiscal year: .40% for the Bond Series, and .25% for each
remaining Series. Absent this expense arrangement, "Other Expenses" for
the Total Return Series, Utilities Series, World Governments Series and
Bond Series would be ___%, ___%, ___% and ___%, respectively, and Total
Annual Fund Expenses would be 1.02%, 1.20%, 1.15% and 3.58%,
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 adviser to Federated Insurance Series has agreed to waive all or a
portion of its fee or reimburse the Fund for certain operating expenses
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 ___%, ___%
and ___% 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 ___%, ___%, and ___%, respectively, of average net
assets.
<PAGE>
CONTRACT VALUE
o It is the starting point for calculating certain values under a Contract, such
as the Cash Surrender Value and the Death Benefit.
o Contract Value is equal to premiums (less the premium expense charge), as
adjusted each Valuation Day to reflect: Subaccount investment experience,
interest credited on Fixed Account Value, charges deducted and other
Contract transactions. (See page 25.)
o It 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 21.)
It can be transferred among the Subaccounts and Fixed Account. We apply a
transfer fee of $25.00 if you make more than 6 transfers in a Contract
Year. (See page 19 for rules and limits.)
o We may credit a "bonus" 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.
CASH BENEFITS
o You may take loans for amounts up to the Cash Surrender Value less loan
interest to the next Contract Anniversary. A 6% annual effective interest rate
applies. Currently, a preferred loan is available beginning in the 11th Contract
Year. See page 33 for rules and limits.
o Partial surrenders generally are available provided you have enough remaining
Cash Surrender Value. A partial surrender fee applies. We will assess a
surrender charge for any resulting reduction in the Specified Amount. See page
30 for limits and a description of the charges. Partial surrenders may have
adverse tax consequences.
o You may surrender the Contract 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
23. Surrenders may be subject to adverse tax consequences.
o Payment options are available. (See page 31.)
DEATH BENEFITS
o Death Benefits pass income tax free to the Beneficiary.
o They are available as lump sum or under a variety of payment options.
o The Minimum Specified Amount is $100,000 for Issue Ages 0-49 and
$50,000 for Issue Ages 50-80. We may allow these minimum
limits to be reduced. (Seepage 18.)
o There are two Coverage Options available:
Option A-- at least equal to the Specified Amount
Option B-- at least equal to the Specified Amount plus Contract Value.
(See page 27.)
o There is flexibility to change the Coverage Option and Specified
Amount. (See page 27 for rules and limits.)
o There are supplemental and/or rider benefits may be available.
(See page 43.)
o We deduct any Indebtedness from the amount payable.
<PAGE>
GENERAL INFORMATION ABOUT KANSAS CITY LIFE
Kansas City Life Insurance Company
Kansas City Life Insurance Company 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 48 states and the District of
Columbia.
We are regulated 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
we do business. We submit annual statements on our operations and finances to
insurance officials in such states and jurisdictions. We also file the forms for
the Contract described in this Prospectus with insurance officials in each state
and jurisdiction in which Contracts are sold.
We are a member of the Insurance Marketplace Standards Association ("IMSA") and
may include the IMSA logo and information about IMSA membership in our
advertisements. Companies that belong to IMSA subscribe to a set of ethical
standards covering the various aspects of sales and service for individually
sold life insurance and annuities.
THE VARIABLE ACCOUNT AND THE FUNDS
Kansas City Life Variable Life Separate Account
We established the Kansas City Life Variable Life Separate Account as a separate
investment account under Missouri law on April 24, 1995. This Variable Account
supports the Contracts and may be used to support other variable life insurance
contracts as well as for other purposes permitted by law. The Variable Account
is registered with the Securities and Exchange Commission ("SEC") as a unit
investment trust under the Investment Company Act of 1940 (the "1940 Act") and
is a "separate account" within the meaning of the federal securities laws. We
have 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 not available under the Contracts and not
otherwise discussed in this Prospectus. We own the assets in the Variable
Account.
We apply income, gains and losses of a Subaccount (realized or unrealized)
without regard to any other income, gains or losses of Kansas City Life or any
other separate account. We cannot make use of assets of the Variable Account
(reserves and other contract liabilities) to cover liabilities arising out of
any other business we conduct. We are obligated to pay all benefits provided
under the Contracts.
The Funds
Each of the Funds is registered with the SEC as a diversified open-end
management investment company under the 1940 Act. However, the SEC does not
supervise their management, investment practices or policies. Each Fund is a
series fund-type mutual fund made up of the Portfolios and other series that are
not available under the Contracts. The investment objectives of each of the
Portfolios is described below.
The investment objectives and policies of certain Portfolios are similar to the
investment objectives and policies of other mutual fund portfolios that may be
managed by the same investment advisor or manager. The investment results of the
Portfolios, however, may be higher or lower than the results of such other
portfolios. There can be no assurance that the investment results of any of the
Portfolios will be comparable to the investment results of any other portfolios,
even if the other portfolio has the same investment adviser or manager.
MFS(R) 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. Its secondary objective is to provide a reasonable opportunity for
growth of capital and income, since many securities offering a better than
average yield may also possess growth potential.
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
objective by investing, under normal circumstances, at least 65% (but up to 100%
at the discretion of the Series' adviser) of its assets in equity and debt
securities of both domestic and foreign companies in the utilities industry.
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 through 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' capital. Up to 20% of the Series' total assets may be invested in
lower-rated or non-rated debt securities commonly known as "junk bonds." The
risks of investing in junk bonds are described in the prospectus for the MFS(R)
Variable Insurance TrustSM, which you should read carefully before investing.
American Century Variable Portfolios, Inc.
(Manager: American Century Investment Management, Inc.
American Century VP Capital Appreciation Portfolio. . The investment
objective of American Century VP Capital Appreciation is capital growth. The
Portfolio will seek to achieve its investment objective by investing primarily
in common stocks that are considered by the investment adviser to have
better-than-average prospects for appreciation.
American Century VP International Portfolio. The investment objective of
American Century VP International Portfolio is capital growth. The Portfolio
will seek to achieve its investment objective by investing primarily in
securities of foreign companies that meet certain fundamental and technical
standards of selection and that have, in the opinion of the investment manager,
potential for appreciation.
Federated Insurance Series
(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 obligations commonly referred to as "junk bonds." The risks of
investing in junk bonds is described in the prospectus for Federated Insurance
Series, which you should 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
exclusively 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
companies 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 Stock 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 Funds will achieve their stated objectives and
policies.
See the current prospectus for each Fund that accompanies this prospectus as
well as the current Statement of Additional Information for each Fund . These
important documents contain more detailed information regarding all aspects of
the Funds. Please read the prospectuses for the Funds carefully before making
any decision concerning the allocation of premium payments or transfers among
the Subaccounts.
We have entered into agreements with either the investment adviser or the
distributor for each of the Funds pursuant to which they pay us a fee. This fee
is based upon an annual percentage of the average aggregate net amount we invest
on behalf of the Variable Account and any other of our separate accounts. These
percentages differ. Some investment advisers or distributors pay us a greater
percentage than other advisers or distributors. These agreements are in lieu of
administrative services we provide.
We cannot guarantee that each Fund or portfolio will always be available for the
Contracts, but in the event that a Fund or portfolio is not available, we 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 other
insurance companies offering variable annuity and variable life insurance
contracts.
We don't 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 Contract
Owners and the owners of variable contracts issued by other companies whose
values are allocated to one of the Funds. Shares of some of the Funds may also
be sold to certain qualified pension and retirement plans qualifying under
Section 401 of the Code. As a result, there is a possibility that a material
conflict may arise between the interests of Owners or owners of other contracts
(including contracts issued by other companies), and such retirement plans or
participants in such retirement plans. In the event of a material conflict, we
will take any necessary steps, including removing the Variable Account from that
Fund, to resolve the matter. The Board of Directors of each Fund will monitor
events in order to identify any material conflicts that may arise and determine
what action, if any, should be taken in response to those events or conflicts.
See the accompanying prospectuses of the Funds for more information.
Addition, Deletion or Substitution of Investments
Subject to applicable law, we can 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 are no longer
available for investment or if further investment in any portfolio should become
inappropriate (in our judgment) 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 applicable law.
Subject to applicable law and any required SEC approval, we may establish new
Subaccounts or eliminate one or more Subaccounts if marketing needs, tax
considerations or investment conditions warrant. We will determine on what basis
we might make any new Subaccounts available to existing Contract Owners.
If we make any of these substitutions or changes we may, by appropriate
endorsement, change the Contract to reflect the substitution or change. If we
decide it is in the best interests of Contract Owners (subject to any approvals
that may be required under applicable law), we may take the following actions
with regard to the Variable Account: o operate the Variable Account as a
management investment company under the 1940 Act, o deregister it under that Act
if registration is no longer required, or o combine it with other Kansas City
Life separate accounts.
Voting Rights
We are the legal owner of shares held by the Subaccounts and we have the right
to vote on all matters submitted to shareholders of the Funds. As required by
law, we will vote shares held in the Subaccounts in accordance with instructions
received from Owners with Contract Value in the Subaccounts. We may be permitted
to vote shares of the Funds in our own right if the applicable federal
securities laws, regulations or interpretations of those laws or regulations
change.
To obtain voting instructions from you, before a meeting you will be sent voting
instruction material, a voting instruction form and any other related material.
Your number of votes will be calculated separately for each Subaccount of the
Variable Account, and may include fractional shares. The number of votes
attributable to a Subaccount will be determined by applying your percentage
interest, if any, in a particular Subaccount to the total number of votes
attributable to that Subaccount. The number of votes for which you may give
instructions will be determined as of the date established by the Fund for
determining shareholders eligible to vote. We will vote shares held by a
Subaccount for which we have no instructions in the same proportion as those
shares for which we do receive voting instructions.
If required by state insurance officials, we may disregard voting instructions
if such instructions would require us to vote shares in a manner that would : o
cause a change in sub-classification or investment objectives of one or more of
the Portfolios, or o approve or disapprove an investment advisory agreement. o
require changes in the investment advisory contract or investment adviser of one
or more of the Portfolios, if we reasonably disapprove of such changes in
accordance with applicable federal regulations.
If we ever disregard voting instructions, we will advise you of that action and
of the reasons for it in the next semiannual report. We may also modify the
manner in which we calculate the weight to be given to pass-through voting
instructions when such a change is necessary to comply with current federal
regulations or the current interpretation of them.
PURCHASING A CONTRACT
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 life
insurance coverage, a temporary insurance agreement ("TIA") should also
accompany the application. As long as the initial premium payment accompanies
the TIA, the TIA provides insurance coverage from the date we receive the
required premium to the date we approve your application. In accordance with our
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 then we will return the initial premium to the
applicant.
For coverage under the TIA, you must pay an initial premium payment that is at
least equal to two Guaranteed Monthly Premiums. Only one Guaranteed Monthly
Premium is required for Contracts when premium payments will be made under a
pre-authorized payment arrangement. (See "Premiums," page 20.) In general,
policies submitted with the required premium payment will have a Contract Date
that is the same as the TIA. However, if the Contract Date is calculated to be
the 29th, 30th or 31st of the month, then the date will be set to the 1st of the
next following month. For Contracts where premium is not accepted at the time of
application or Contracts where values are applied to the new Contract from
another contract, the Contract Date will be the approval date plus up to two
days, unless the approval is the 27th, 28th or 29th of the month in which case
the Contract Date would be the first of the next month. We have several
exceptions to these rules, described as follows:
Pre-Authorized Check Payment Plan (PAC) or Combined Billing
(CB)--Premium With Application If you request PAC or CB and provide the
initial premium 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 you request CB and don't provide the initial premium 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 or between the 1st and the 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 Contract
Date will be the 1st of the following month.
Government Allotment (GA) and Federal Allotment (FA) If you request GA
or FA on the application and provide an initial premium with the
application, the Contract Date will be the 1st of the month of
approval. If you request GA or FA and we receive no initial premium the
Contract Date will be the first of the month for which we receive a
full monthly allotment.
Conversions
If you convert a Kansas City Life term insurance product to a new
Contract, the Contract Date will be the date that the previous contract
was paid to. If you are converting more than one term policy, the
Contract Date will be determined by the contract with the earliest date
that premiums were paid to.
Specified Amount Above $250,000
If you request a specified amount above $250,000 and provide an initial
premium 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 the Owner may be
permitted by state insurance law 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. We will charge Monthly Deductions 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 you have met all underwriting and other requirements and we have
approved your application. We will deduct Contract charges as of the Contract
Date.
We require satisfactory evidence of the proposed Insured's insurability, which
may include a medical examination. The available issue ages are 0 through 80 on
a nonsmoker basis, 15 through 80 on a preferred nonsmoker basis, and 15 through
80 on a smoker basis. Age is determined on the Insured's age last birthday on
the Contract Date. The minimum Specified Amount is $100,000 for issue ages 0--49
and $50,000 for issue ages 50--80. Acceptance of an application depends on our
underwriting rules. We have the right to reject any 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. While the Insured is living, the Owner may by Written Notice name a
contingent Owner or a new Owner. If a contingent Owner has not been named ,
ownership of the Contract passes to the estate of the last owner to die. The
Owner may also be changed prior to the Insured's death by Written Notice
satisfactory to us. A change in Owner may have tax consequences. (See "Tax
Considerations," page 49.)
Free Look Right to Cancel Contract
You may cancel your Contract for a refund during your "free-look" period. You
may also cancel an increase in Specified Amount that you have requested. The
free look period expires on the latest of: o 10 days after you receive your
Contract or for an increase, your adjusted Contract; o 45 days after your
application for either the Contract or the increase in Specified Amount is
signed; or o 10 days after we mail or deliver a cancellation notice.
If you decide to cancel the Contract or an increase in Specified Amount, you
must return the Contract to the Home Office or to the authorized Kansas City
Life agent who sold it. Immediately after mailing or delivery within the
"free-look" period, the Contract or the increase will be deemed void from the
beginning. If you cancel the Contract, we will refund premiums paid within seven
calendar days after we receive the returned Contract. If you cancel an increase
in the Specified Amount, we will return any charges attributable to the increase
to your Contract Value.
PREMIUM PAYMENTS AND ALLOCATIONS
Premiums
The Contract is flexible with regard to the amount of premiums you pay. When we
issue the Contract we will set a Planned Premium amount. This amount is only an
indication of your preference in making premium payments. You may make
additional unscheduled premium payments at any time while the Contract is in
force. We have the right to limit the number (except in Texas) and amount of
such premium payments. There are requirements regarding the minimum and maximum
premium amounts that you can pay.
We deduct a premium expense charge from all premiums prior to allocating them to
your Contract. (See "Charges and Deductions," page 21.)
Minimum Premium Amounts. The minimum initial premium payment required is
the least amount for which we will issue a Contract. The minimum initial premium
payment amount depends on a number of factors. These factors include Age, sex
and risk class of the proposed Insured, the initial Specified Amount, any
supplemental and/or rider benefits and the Planned Periodic Premium payments you
propose to make. (See "Planned Periodic Premiums," below.) Consult your Kansas
City Life agent for information about the initial premium required for the
coverage you desire.
Each premium after the initial premium must be at least $25.
Maximum Premium Information. Total premiums paid may not exceed premium
limitations for life insurance set forth in the Internal Revenue Code. We 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 that we determine is 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 46.)
Your Contract may become a modified endowment contract if premiums paid exceed
the "7-Pay Test" as set forth in the Internal Revenue Code. We 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 46.)
We reserve the right to require satisfactory evidence of insurability prior to
accepting unscheduled premiums. (See "Premium Allocations and Crediting," page
18.)
General Premium Information. We will not accept premium payments after the
Maturity Date. You must make premium payments by check payable to Kansas City
Life Insurance Company or by any other method that we deem acceptable. You must
clearly mark a loan repayment as such or we will credit it as a premium. (See
"Loan Repayment," page 29.)
Planned Premium Payments. When applying for a Contract, you select a plan
for paying premiums. Failure to pay Planned Premium Payments will not
necessarily cause a Contract to lapse. Conversely, paying all Planned Premium
Payments will not guarantee that a Contract will not lapse. You may elect to pay
level premiums quarterly, semi-annually or annually. You may also arrange to pay
Planned Premium Payments on a special monthly or quarterly basis under a
pre-authorized payment arrangement.
You are not required to pay premiums in accordance with your plan. You can pay
more or less than planned or skip a Planned Premium Payment entirely. (See
"Premium Payments to Prevent Lapse," page 18, and "Guaranteed Payment Period and
Guaranteed Monthly Premium," below.) Subject to the minimum and maximum limits
described above, you can change the amount and frequency of Planned Premiums
Payments at any time.
Guaranteed Payment Period and Guaranteed Monthly Premium. The Guaranteed Payment
Period is the period during which we guarantee that your Contract will not lapse
as long as you pay at least the specified level of premium. To qualify for this
guarantee the total premiums paid must be 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 Period is five years following the Contract Date and five
years following the effective date of an increase in the Specified Amount. The
Contract shows the Guaranteed Monthly Premium.
The per $1,000 Guaranteed Monthly Premium factors for the Specified Amount vary
by risk class, issue Age, and sex. We include additional premiums for
substandard ratings and supplemental and/or rider benefits in the Guaranteed
Monthly Premium amount. Upon a change to your Contract, we will recalculate the
Guaranteed Monthly Premium, notify you of the new Guaranteed Monthly Premium and
amend your Contract to reflect the change.
Premium Payments Upon Increase in Specified Amount. A new Guaranteed
Payment Period begins on the effective date of an increase in Specified Amount.
We will notify you of the new Guaranteed Monthly Premium for this period.
Depending on the Contract Value at the time of an increase and the amount of the
increase requested, you may need to make an additional premium payment or change
the amount of Planned Periodic Premiums. (See "Changes in Specified Amount,"
page 28.)
Premium Payments to Prevent Lapse
Because the value of amounts allocated to the Variable Account will vary
according to the investment performance of the Funds, the specific amount of
premiums required to prevent lapse of the Contract will also vary. Stated
simply, your Contract will lapse when there is insufficient value remaining in
the Contract at the end of the Grace Period. The specific conditions that will
result in your Contract lapsing will also depend on whether a Guaranteed Payment
Period is in effect.
During the Guaranteed Payment Period. A grace period starts if:
o there is not enough cash surrender value in your Contract to cover the Monthly
Deduction, and o the premiums paid are less than those required to guarantee
lapse will not occur during the Guaranteed Payment Period. (See "Guaranteed
Payment Period and Guaranteed Monthly Premium," page 17.)
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 to make the Cash Surrender Value equal to three Monthly
Deductions.
After the Guaranteed Payment Period. A grace period starts if the Cash
Surrender Value will not cover the Monthly Deduction. To prevent the Contract
from lapsing you must pay enough premium to provide a Cash Surrender Value at
least equal to three Monthly Deductions. You must make this payment during the
grace period.
Grace Period. The grace period is 61 days. Its purpose is to give you the
chance to pay enough premiums to keep your policy in force. We will send you
notice of the amount required to be paid during the grace period. The grace
period will begin when we send the notice. Your Contract will remain in force
during the grace period. If the Insured dies during the grace period, the Death
Benefit proceeds will be payable to the Beneficiary, but the amount paid will
reflect a reduction for the Monthly Deductions due on or before the date of the
Insured's death. (See "Amount of Death Benefit Proceeds," page 27.) If adequate
premiums have 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 43.) A grace period also begins if Indebtedness becomes
excessive. (See "Loan Repayment," page 29.)
ALLOCATIONS AND TRANSFERS
Premium Allocations and Crediting
In the Contract application, you specify the percentage of a premium (less
premium expense charges) you want allocated to each Subaccount and/or to the
Fixed Account. The sum of your allocations must equal 100%. We have the right to
limit the number of Subaccounts to which you allocate premiums (not applicable
to Texas Contracts). We will never limit the number to less than 12. You can
change the allocation percentages at any time by sending Written Notice to the
Home Office. You can make changes in your allocation by telephone if you have
provided proper authorization. (See "Telephone Transfer, Premium Allocation and
Loan Privileges," page 53.) The change will apply to the premium payments
received with or after receipt of your notice.
On the Allocation Date, we will allocate the initial premium to the Federated
Prime Money Fund II Subaccount. If we receive any additional premiums before the
Reallocation Date, we will also allocate these premiums to the Federated Prime
Money Fund II Subaccount.
On the Reallocation Date we will allocate the amount in the Federated Prime
Money Fund II Subaccount as directed in your application. (See "Determining the
Contract Value," page 25.)
We will credit premiums received on or after the Reallocation Date as directed
by you. The premiums will be invested within the Valuation Period during which
we receive them at our Home Office unless we require additional underwriting. We
won't credit premiums requiring additional underwriting until we have completed
underwriting and accept the premium payment. If we reject the additional premium
payment, we will return the premium payment promptly, without any adjustment for
investment experience.
Transfer Privilege
After the Reallocation Date and prior to the Maturity Date, you may transfer
amounts among the Subaccounts and the Fixed Account, subject to the following
restrictions:
o The minimum transfer amount is the lesser of $250 or the entire amount in that
Subaccount or the Fixed Account.
o We will treat a transfer request that reduces the amount in a Subaccount or
the Fixed Account below $250 as a transfer request for the entire amount in that
Subaccount or the Fixed Account.
o We allow only one transfer each Contract Year from the Fixed Account.
o 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.)
There is no limit on the number of transfers you can make between the
Subaccounts or to the Fixed Account. The first six transfers during each
Contract Year are free. After the first six transfers, we will assess a $25
Transfer Processing Fee. Unused free transfers don't carry over to the next
Contract year. For the purpose of assessing the fee, we consider each Written
Notice or telephone request to be one transfer, regardless of the number of
Subaccounts or the Fixed Account affected by that transfer. We will deduct the
processing fee from the remaining Contract Value.
We will make the transfer on the Valuation Day that we receive Written Notice
requesting such transfer. You may also make transfers by telephone if you have
made the appropriate election at the time of application or have provided proper
authorization. (See "Telephone Transfer, Premium Allocation and Loan
Privileges," page 50. )
Special Transfer Right. During the first 24 Months of the Contract or
within the first 24 months following the effective date of an increase to the
Specified Amount, you may exercise a one-time Special Transfer Right by
transferring all or a portion of the Variable Account Value to the Fixed
Account. The Transfer Processing Fee does not apply to the Special Transfer
Right.
Dollar Cost Averaging Plan
The Dollar Cost Averaging Plan is an optional feature available with the
Contract. If elected, it enables you to automatically transfer specified dollar
amounts from the Federated Prime Money Fund II Subaccount to other Subaccounts.
The goal of the Dollar Cost Averaging Plan is to make you less susceptible to
market fluctuations by allocating on a regularly scheduled basis (as opposed to
allocating the total amount at one particular time). We do not guarantee that
the Dollar Cost Averaging Plan will result in a gain.
Transfers under this plan occur on a monthly basis for a period you choose,
ranging from 3 to 36 months. To participate in the plan you must transfer at
least $250 from the Federated Prime Money Fund II Subaccount each month. The
required amounts may be allocated to the Federated Prime Money Fund II
Subaccount through initial or subsequent premium payments or by transferring
amounts into the Federated Prime Money Fund II Subaccount from the other
Subaccounts or from the Fixed Account. Transfers from the Fixed Account may have
certain restrictions.
You may elect this plan at the time of application by completing the
authorization on the application or after the Contract is issued by completing
the election form and returning it to us. Dollar cost averaging transfers will
start on the next Monthly Anniversary Day on or next following the Reallocation
Date or the date you request. Dollar cost averaging will terminate on any of the
following: o at the completion of the designated number of months, o when the
value of the Federated Prime Money Fund II Subaccount is completely depleted, or
o the day we receive Written Notice instructing us to cancel the plan.
Transfers from the Federated Prime Money Fund II Subaccount for the Dollar Cost
Averaging Plan will not count toward the six free transfers permitted each
Contract Year. We have the right to cancel this feature at any time with notice
to you.
Portfolio Rebalancing Plan
The Portfolio Rebalancing Plan is an optional feature available with the
Contract. If elected, it enables you to have the accumulated balance of each
Subaccount redistributed quarterly to equal a specified percentage of the
Variable Account Value. The goal of the Portfolio Rebalancing Plan is to
automatically diversify your portfolio mix. This plan automatically adjusts your
Portfolio mix to be consistent with the allocation most recently requested. We
will make this adjustment at three-month intervals from the Monthly Anniversary
Day on which the Portfolio Rebalancing Plan begins. We will not complete the
redistribution if the Contract Value is negative at the time portfolio
rebalancing is scheduled.
The redistribution will not count toward the six free transfers permitted each
Contract Year. If you also have elected the Dollar Cost Averaging Plan and it
has not been completed, the Portfolio Rebalancing Plan will start on the Monthly
Anniversary Day after the Dollar Cost Averaging Plan terminates.
You may elect this plan at the time of application by completing the
authorization on the application. You may also elect it after the Contract is
issued by completing the election form and returning it to us. The Portfolio
Rebalancing Plan will terminate when:
o you request any other transfer, or
o the day we receive Written Notice instructing us to cancel the plan.
We reserve the right to cancel this option at any time with notice to you.
FIXED ACCOUNT
The Fixed Account is not registered under the Securities Act of 1933 and is not
registered as an investment company under the Investment Company Act of 1940.
The Securities and Exchange Commission has not reviewed the disclosure in this
Prospectus relating to the Fixed Account. Certain general provisions of the
Federal securities laws relating to the accuracy and completeness of statements
made in prospectuses may still apply.
You may allocate some or all of your premiums and transfer some or all of the
Variable Account Value to the Fixed Account. You may also make transfers from
the Fixed Account, but restrictions may apply. (See page 19, Transfer
Privilege.) The Fixed Account is part of our general account and pays interest
at declared rates guaranteed for each calendar year. We guarantee that this rate
will be at least 4%.
Our general account supports our insurance and annuity obligations. 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
We guarantee to credit the Fixed Account Value with a minimum 4% effective
annual interest rate. We intend to credit Fixed Account Value with current rates
in excess of the 4% minimum, but we are not obligated to do so. Current interest
rates are influenced by, but don't necessarily correspond to, prevailing general
market interest rates. We will determine current rates. You assume the risk that
the interest we credit may not exceed the guaranteed rate. Since we anticipate
changing the current interest rate from time to time, we will credit different
allocations with different interest rates, based upon the date amounts are
allocated into the Fixed Account. We may change the interest rate credited to
allocations from premiums or new transfers at any time. We will not change the
interest rate more than once a year on amounts in the Fixed Account.
For the purpose of crediting interest, we currently account for amounts deducted
from the Fixed Account 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 don't have the effect of reducing the guaranteed rate of interest below
4%. We may also shorten the period for which the interest rate applies to less
than a year (except for the year in which an amount is received or transferred).
Calculation of Fixed Account Value
Fixed Account Value is equal to:
o amounts allocated or transferred to the Fixed Account, plus
o interest credited, less
o amounts deducted, transferred or surrendered .
Delay of Payment
We reserve the right to delay payment of any surrender, partial surrender, or
transfer from the Fixed Account for up to six months from the date we receive
the request.
CHARGES AND DEDUCTIONS
We may realize a profit on any charges and deductions. We may use this profit
for any purpose, including payment of distribution charges. Below is a listing
and description of the applicable charges and deductions under the Contract.
Premium Expense Charge
We deduct a 2.25% premium expense charge from each premium payment. This charge
reimburses us for state and local premium taxes as well as related
administrative expenses associated with the Contracts. We apply premium payments
to your Contract net of the premium expense charge.
Monthly Deduction
We will make Monthly Deductions to collect various charges under your Contract.
We will make these Monthly Deductions on each Monthly Anniversary Day following
the Allocation Date. On the Allocation Date, we 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 15.) The Monthly
Deduction consists of : (1) cost of insurance charges, (2) Monthly Expense
Charge, and (3) any charges for supplemental and/or rider benefits, as described
below.
We deduct the Monthly Deduction pro rata on the basis of the portion of Contract
Value in each Subaccount and/or the Fixed Account.
Cost of Insurance Charge. This charge compensates us for the expense of
providing insurance coverage. The charge depends on a number of variables and
will vary from Contract to Contract and from month to month. For any Contract,
we calculate the cost of insurance on a Monthly Anniversary Day by multiplying
the current cost of insurance rate for the Insured by the net amount at risk for
that Monthly Anniversary Day.
The cost of insurance rate for a Contract on a Monthly Anniversary Day is based
on the Insured's Age, sex, number of completed Contract Years, Specified Amount
and risk class. We currently place Insureds in one of the following classes,
based on underwriting: o Standard Smoker--available issue ages 15-80 o Standard
Nonsmoker--available issue ages 0-80 o Preferred Nonsmoker--available issue ages
15-80
We may place an Insured in a substandard risk class, which involves a higher
mortality risk than the Standard Smoker or Standard Nonsmoker classes.
The net amount at risk on a Monthly Anniversary Day is the difference between
the Death Benefit (discounted at an interest rate which is the monthly
equivalent of 4% per year) and the Contract Value (as calculated on that Monthly
Anniversary Day before the cost of insurance charge is deducted).
We guarantee that the cost of insurance rates 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.
Our current cost of insurance rates may be less than the guaranteed rates that
are set forth in the Contract. We will determine current cost of insurance rates
based on our expectations as to future mortality experience. We may change these
rates from time to time.
Cost of insurance rates 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 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.
Cost of Insurance Rates for Increases. We will determine the cost of
insurance rate for an increase in Specified Amount on each Monthly Anniversary
Day. It is based on the Insured's Age, sex, number of completed Contract Years
and risk class.
We place the Insured in a risk class when we approve the Contract, based on our
underwriting of the application. When you request an increase in Specified
Amount, we do additional 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, we apply the lower rates to the entire Specified Amount. If the risk
class for the increase has higher cost of insurance rates than the existing
class, we apply the higher rates only to the increase in Specified Amount and
the existing risk class will continue to apply to the existing Specified Amount.
We do not conduct underwriting for an increase in Specified Amount if you
request the increase as part of a conversion from a term contract or on
exercising the Option to Increase Specified Amount Rider. (See "Supplemental
and/or Rider Benefits," page 47.) In the case of a term conversion, the risk
class that applies to the increase is 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 is the class in effect on
the initial Specified Amount at the time that you elect the increase.
We determine the net amount at risk associated with a Specified Amount increase
by determining 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
we attribute to the Specified Amount increase. We attribute the remaining
percentage of the Contract's total net amount at risk 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 we attribute 40% of
the total net amount at risk to the Specified Amount increase.) On each Monthly
Anniversary Day, the net amount at risk we use 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.
Legal Considerations Relating to Sex-Distinct Premium Payments and
Benefits. Cost of insurance rates for Contracts generally distinguish between
males and females. Thus, premium payments and benefits under Contracts covering
males and females of the same age will generally differ. (In some states, the
cost of insurance rates don't vary by sex.)
We also offer Contracts that don't distinguish between male and female rates
where 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. We will make available to such prospective purchasers Contracts with cost
of insurance rates that don't distinguish between males and females.
Monthly Expense Charge. The Monthly Expense Charge is part of the Monthly
Deduction. We begin deducting the Monthly Expense Charge from the Contract Value
as of the Contract Date. (See "Applying for a Contract," page 18.) Thereafter,
we deduct a Monthly Expense Charge 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 that applies in all
years. We guarantee that the maintenance charge will not exceed $6.00.
(2) an acquisition charge which is a charge of $20 per Contract Month. This
charge applies for the first Contract Year and for 12 months following the
effective date of an increase in Specified Amount.
The Monthly Expense Charge reimburses us for expenses incurred in the
administration of the Contracts and the Variable Account. Even if the guaranteed
charges prove to be insufficient, we will not increase the charges above such
guaranteed levels and we will incur the loss.
Supplemental and/or Rider Benefit Charges. These charges are part of the
Monthly Deduction and vary by the benefit. (See "Supplemental and/or Rider
Benefits," page 43.)
Daily Mortality and Expense Risk Charge
We deduct a daily charge from assets in the Subaccounts attributable to the
Contracts. This charge does not apply to Fixed Account assets. The current
charge is at an annual rate of 0.90% of net assets. We guarantee that this rate
will not increase for the duration of a Contract.
The mortality risk we assume is that the Insured may die sooner than anticipated
and we have to pay death benefits greater than we anticipated. The expense risk
we assume is that expenses incurred in issuing and administering the Contracts
and the Variable Account will exceed the administrative charges we assess.
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. For the purpose of
assessing the fee, we will consider each written or telephone request seeking a
transfer to be one transfer, regardless of the number of accounts affected by
the transfer. We will deduct the Transfer Processing Fee from the amount being
transferred or from the remaining Contract Value, according to your
instructions. We don't expect a profit from this fee.
Surrender Charge
During the first fifteen Contract Years, we will deduct a Surrender Charge from
the Contract Value if the Contract is completely surrendered, 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: o the Deferred
Sales Load, and o 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. We credit any
Surrender Charge deducted upon lapse 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 during which the Contract was
lapsed will not count.
Deferred Sales Load. The purpose of the Deferred Sales Load is to reimburse
us for some of the expenses incurred in the distribution of the Contracts. This
Deferred Sales Load is 30% of actual premiums paid up to a maximum premium
amount shown in the Contract. We base the maximum premium amount shown in the
Contract 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.
The Deferred Sales Load that applies during the first two years of a Surrender
Charge period may not exceed: o 30% of premiums paid up to the first "SEC
guideline annual premium," o 10% of premiums paid in excess of the first
guideline annual premium and up to the second "SEC guideline annual premium, and
o 9% of premium payments made in excess of two guideline annual premiums.
An "SEC guideline annual premium" is a hypothetical level amount that would be
payable through the Maturity Date for the benefits provided under the Contract,
assuming cost of insurance rates based on the 1980 Commissioners Standard
Ordinary Mortality Tables, net investment earnings under the Contract at an
effective annual rate of 5% and sales and other charges imposed under the
Contract.
Deferred Administrative Expense. The Deferred Administrative Expense
partially covers the administrative costs of the Contracts as well as other
overhead costs connected with our variable life insurance operations. The Table
below shows the Deferred Administrative Expense we deduct if the Contract is
completely surrendered, lapses or if the Specified Amount is reduced (including
when a partial surrender reduces the Specified Amount) during the first fifteen
years of the Contract 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 grades 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, we will prorate the Deferred Administrative Expense
between years monthly. The charge for the first five years is level.
Partial Surrender Fee
We deduct an administrative charge upon a partial surrender. This charge is the
lesser of 2% of the amount surrendered or $25. We will deduct this charge from
the Contract Value in addition to the amount requested to be surrendered and it
will be considered as part of the partial surrender amount. We don't anticipate
making a profit on this charge.
Fund Expenses
The value of the net assets of each Subaccount already reflects the investment
advisory fees and other expenses incurred by the corresponding Portfolio in
which the Subaccount invests. This means that these charges are deducted before
we calculate Subaccount Values. These charges are not directly deducted from
your Contract Value. See the prospectuses for the Funds.
Reduced Charges for Eligible Groups
We may reduce the sales and administration charges for Contracts issued to a
class of associated individuals or to a trustee, employer or similar entity. We
may reduce these charges if we anticipate that the sales to the members of the
class will result in lower than normal sales or administrative expenses. We will
make any reductions in accordance with our rules in effect at the time of the
application. The factors we will consider in determining the eligibility of a
particular group and the level of the reduction are as follows: o nature of the
association and its organizational framework, o method by which sales will be
made to the members of the class, o facility with which premiums will be
collected from the associated individuals, o association's capabilities with
respect to administrative tasks, o anticipated persistency of the Contract, o
size of the class of associated individuals, o number of years the association
has been in existence, and o any other such circumstances which justify a
reduction in sales or administrative expenses.
Any reduction will be reasonable, 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
We do not currently assess a charge for any taxes other than state and local
premium taxes incurred as a result of the operations of the Subaccounts. We
reserve the right to assess a charge for such taxes against the Subaccounts if
we determine that such taxes will be incurred.
HOW YOUR CONTRACT VALUES VARY
Your Contract does not provide a minimum guaranteed Contract Value or Cash
Surrender Value. Values will vary with the investment experience of the
Subaccounts and/or the crediting of interest in the Fixed Account, and will
depend on the allocation of Contract Value. If the Cash Surrender Value on a
Monthly Anniversary Day is less than the amount of the Monthly Deduction to be
deducted on that date (see "Premium Payments To Prevent Lapse," page 21) 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 21, and "Grace Period," page 21.)
Bonus on Contract Value in the Variable Account
We may credit a bonus on amounts in the Variable Account beginning in the 11th
Contract Year. We will credit any bonus on each Monthly Anniversary Day. The
monthly bonus equals 0.0375% (0.45% on an annualized basis) of the Contract
Value in each Subaccount at the end of each Contract Month. We don't guarantee
that we will credit the bonus.
Determining the Contract Value
On the Allocation Date the Contract Value is equal to the initial 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 following:
o performance of the Subaccounts to which amounts have been allocated,
o interest credited on amounts allocated to the Fixed Account,
o interest credited on amounts in the Loan Account,
o charges,
o transfers,
o partial surrenders, and
o loans and loan repayments.
Subaccount Values. When you allocate an amount to a Subaccount, either by
premium allocation or transfer, we credit your Contract with accumulation units
in that Subaccount. The number of accumulation units in the Subaccount is
determined by dividing the amount allocated to the Subaccount by the
Subaccount's accumulation unit value for the Valuation Day when the allocation
is made.
The number of Subaccount accumulation units we credit to your Contract will
increase when you allocate premiums to the Subaccount and when you transfer
amounts to the Subaccount. The number of Subaccount accumulation units credited
to a Contract will decrease when: o we take the allocated portion of the Monthly
Deduction from the Subaccount, o you make a loan, o you transfer an amount from
the Subaccount, or o you take a partial surrender ( including the Partial
Surrender Fee) from the Subaccount.
Accumulation Unit Values. A Subaccount's accumulation unit value varies to
reflect the investment experience of the underlying Portfolio. It may increase
or decrease from one Valuation Day to the next. We arbitrarily set the
accumulation unit value for each Subaccount at $10 when we established the
Subaccount. For each Valuation Period after establishment, the accumulation unit
value is determined by multiplying the value of an accumulation unit for a
Subaccount for the prior valuation period by the net investment factor for the
Subaccount for the current valuation period.
Net Investment Factor. The net investment factor is an index used to
measure the investment performance of a Subaccount from one Valuation Day to the
next. It is based on the change in net asset value of the Fund shares held by
the Subaccount, and reflects any gains or losses in the Subaccounts, dividends
paid, any capital gains or losses, any taxes and the daily mortality and expense
risk charge.
Fixed Account Value. On any Valuation Day, the Fixed Account Value of a
Contract is the total of:
o all premiums allocated to the Fixed Account, plus
o any amounts transferred to the Fixed Account (including amounts transferred in
connection with Contract loans), plus
o interest credited on such premiums and
amounts transferred, less
o the amount of any transfers from the Fixed Account,
less
o the amount of any partial surrenders (including the Partial Surrender
Fee) taken from the Fixed Account, less,
o 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:
o 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
o 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 is the amount you have available in cash if you fully
surrender the Contract. We use this amount to determine whether a partial
surrender may be taken, whether Contract loans may be taken, and whether a grace
period starts. The Cash Surrender Value on a Valuation Day is equal to the
Contract Value less any applicable Surrender Charges and any Indebtedness. (See
"Premium Payments to Prevent Lapse," page 21 and "Surrendering the Contract for
Cash Surrender Value," page 30.)
DEATH BENEFIT AND CHANGES IN SPECIFIED AMOUNT
As long as the Contract remains in force, we will pay the Death Benefit proceeds
upon receipt at the Home Office of satisfactory proof of the Insured's death. We
may require return of the Contract. We will pay the Death Benefit proceeds in a
lump sum (See "Payment of Proceeds," page 43) or, if you prefer, under a payment
option (See "Payment Options," page 31). We will pay the Death Benefit proceeds
to the Beneficiary. (See "Selecting and Changing the Beneficiary," page 29.)
Amount of Death Benefit Proceeds
The Death Benefit proceeds are equal to the following:
o the Death Benefit under the Coverage Option selected calculated on the date of
the Insured's death; plus
o any supplemental and/or rider benefits; minus
o any Indebtedness on that date; minus
o any past due Monthly Deductions if the date of death occurred during a grace
period.
Under certain circumstances, the amount of the Death Benefit may be further
adjusted or the Death Benefit may not be payable. (See "Limits on Rights to
Contest the Contract" and "Misstatement of Age or Sex," page 42.)
If part or all of the Death Benefit is paid in one sum, we 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
You may choose one of two Coverage Options, which will be used to determine the
Death Benefit:
o Option A: Death Benefit is the Specified Amount. Option A generally
provides a level Death Benefit unless performance is very favorable and
the applicable percentage calculation (described below) becomes
applicable. The Death Benefit ordinarily will not change for several years
to reflect any favorable investment performance and may not change at all.
o Option B: Death Benefit is at least equal to the Specified Amount plus the
Contract Value on the date of death. Thus, 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 38.
Under both Options A and B we perform another calculation to ensure that the
amount of insurance we provide meets the definition of life insurance under the
Internal Revenue Code. To apply this calculation, we multiply the applicable
percentage by the Contract Value on the date of death. If the resulting amount
is greater than the amount provided under the Coverage Option, the Death Benefit
is equal to this greater amount. The "applicable percentage" is 250% when the
Insured is Age 40 or less. The percentage decreases each year after age 40 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
select the Coverage Option when you apply for the Contract. You may change the
Specified Amount and Coverage Option, 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 you make no more than one change in Coverage
Option in any 12-month period. After any change, we require the Specified Amount
to 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 we receive and accept the request.
We may require satisfactory evidence of insurability.
When you make a change from Option A to Option B, 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 amount of the Contract Value on the effective
date of the change. When you make a change from Option B to Option A, 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. We may require satisfactory evidence of insurability.
A change in Coverage Option may have tax consequences. (See "Tax
Considerations," page 46.)
Changes in 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 that you make no more than 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 your Contract as a life
insurance contract, we will refund the amount of such premium in excess of the
premium limitations. We will make this refund to you after the next Monthly
Anniversary.
Decreases. We reserve the right to decline a requested decrease in the
Specified Amount to help ensure compliance with the guideline premium
limitations. We can decline the decrease if compliance with the guideline
premium limitations under current tax law resulting from this decrease would
result in immediate termination of the Contract. We also can decline the
decrease request if we would have to make payments to you from the Contract
Value for compliance with the guideline premium limitations and the amount of
such payments would exceed the Cash Surrender Value of the Contract.
We require that 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 decrease monthly Cost of
Insurance Charges. However, a Surrender Charge does apply if the Specified
Amount is decreased (See "Surrender Charge," page 23.)
A decrease in the Specified Amount may have tax consequences. (See "Tax
Considerations," page 46.)
Increases. You must submit an application for an increase. Any increase in
the Specified Amount must be at least $25,000. (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.) We reserve the right to require satisfactory evidence
of insurability. In addition, the Insured's Age must be less than the current
maximum issue Age for the Contracts. We may decline an application for an
increase. If you increase, a change in Planned Premiums may be advisable. (See
"Premium Payments Upon Increase in Specified Amount," page 17.)
The increase in Specified Amount is effective on the Monthly Anniversary Day on
or following the date we receive and approve the request for the increase. A new
Guaranteed Payment Period begins on the effective date of the increase and will
continue for five years. We recalculate the Contract's Guaranteed Monthly
Premium to reflect the increase. If a Guaranteed Payment Period is in effect, it
is also likely that the Contract's Guaranteed Monthly Premium amount will be
increased. (See "Guaranteed Payment Period and Guaranteed Monthly Premium," page
21 and "Premium Payments Upon Increase in Specified Amount," page 17.)
You may cancel an increase in Specified Amount 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 16.)
A new Surrender Charge and Surrender Charge period 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 23). After an
increase, we (for purposes of calculating Surrender Charges) attribute a portion
of each premium payment you make to the Specified Amount increase, even if you
don't increase the amount or frequency of your premiums. We allocate premiums
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 is 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 is used to
reduce the initial Specified Amount.
Selecting and Changing the Beneficiary
You select the Beneficiary in your application. You may change a Beneficiary
designation in accordance with the terms of the Contract. If you make an
irrevocable Beneficiary designation, you must obtain the Beneficiary's consent
to change the Beneficiary. The Primary Beneficiary is the person entitled to
receive the Death Benefit proceeds under the Contract. If the Primary
Beneficiary is not living, the Contingent Beneficiary is entitled to receive the
Death Benefit proceeds. If the Insured dies and there is no surviving
Beneficiary, the Owner will be the Beneficiary.
CASH BENEFITS
Contract Loans
You may borrow against your Contract while the Insured is living by submitting a
Written Request to the Home Office. The maximum loan amount available is the
Contract's Cash Surrender Value on the effective date of the loan less loan
interest to the next Contract Anniversary. We will process Contract loans as of
the date your Written Request is received and approved. You may also make loans
by telephone if you made the appropriate election at the time of application or
provided proper authorization to us. (See "Telephone Transfer, Premium
Allocation and Loan Privileges," page 50.) We will send Loan proceeds to you
generally within seven calendar days. (See "Payment of Proceeds," page 43.)
Interest. We 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 you don't pay interest when due, we add the interest to the
loan and it becomes part of the Indebtedness.
Loan Collateral. When you make a Contract loan, we transfer an amount
sufficient to secure the loan out of the Subaccounts and the unloaned value in
the Fixed Account and into the Contract's Loan Account. We will reduce the Cash
Surrender Value by the amount transferred to the Loan Account. The loan does not
have an immediate effect on the Contract Value. You can specify the Variable
Accounts and/or Fixed Account from which we transfer collateral. If you don't
specify, we will transfer collateral 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 you make the loan. On
each Contract Anniversary, we will transfer an amount of Cash Surrender Value
equal to any due and unpaid loan interest to the Loan Account. We will transfer
due and unpaid interest in the same proportion that each Subaccount Value and
the unloaned value in the Fixed Account Value bears to the total unloaned
Contract Value.
We will credit the Loan Account 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 and the amount credited to the Loan Account). We will add the
interest earned on the Loan Account to the Fixed Account.
Preferred Loan Provision. Beginning in the eleventh Contract Year, an
additional type of loan is available. It is called a preferred loan. For a
preferred loan we will credit the amount in the Loan Account securing the
preferred loan with interest at an effective annual rate of 6.0%. Thus, the net
cost of the preferred loan is 0.0% per year. The maximum amount available for a
preferred loan is the Contract Value less premiums paid. This amount may not
exceed the maximum loan amount. The preferred loan provision is not guaranteed.
The tax consequences of a preferred loan are uncertain. You should consult a tax
adviser if you are considering taking out a preferred loan.
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 $10.00. Loan repayments must be sent to the Home Office and we
will credit them as of the date received. You should clearly mark a loan
repayment as such or we will be credit it as a premium. (Premium expense charges
do not apply to loan repayments, unlike unscheduled premium payments. When you
make a loan repayment, we transfer Contract Value in the Loan Account in an
amount equal to the repayment from the Loan Account to the Subaccounts and the
unloaned value in the Fixed Account. Thus, a loan repayment will immediately
increase the Cash Surrender Value by the amount transferred from the Loan
Account. A loan repayment does not have an immediate effect on the Contract
Value. Unless you specify otherwise, we will transfer loan repayment amounts 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 will apply only to the non-loaned portion of the Contract Value. The
longer the loan is outstanding, the greater the effect is likely to be.
Depending on the investment results of the Subaccounts or credited interest
rates for the unloaned value in the Fixed Account while the loan is outstanding,
the effect could be favorable or unfavorable. Loans may increase the potential
for lapse if investment results of the Subaccounts are less than anticipated.
Loans can, (particularly if not repaid) make it more likely than otherwise for a
Contract to terminate. See "Tax Considerations," page 46, for a discussion of
the tax treatment of Contract 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.
We will deduct Indebtedness from any Death Benefit proceeds. (See "Amount of
Death Benefit Proceeds," page 27.)
Your Contract will be in default if the Loan Account Value on any Valuation Day
exceeds the Contract Value less any applicable Surrender Charge. We will send
you notice of the default. You will have a 61-day grace period to submit a
sufficient payment to lapse. The notice will specify the amount that must be
repaid to prevent termination. (See "Premium Payments to Prevent Lapse," page
18.)
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. A Surrender Charge may apply.
(See "Surrender Charge," page 23.) We may require return of the Contract. We
will process a surrender request as of the date we receive your written request
and all required documents. Generally we will make payment within seven calendar
days. (See "Payment of Proceeds," page 43.) You may receive the Cash Surrender
Value in one lump sum or you may apply it to a payment option. (See "Payment
Options," page 31.) Your Contract will terminate and cease to be in force if you
surrender it for one lump sum. You will not be to able to later reinstate it.
Surrenders may have adverse tax consequences.(See "Tax Considerations," page
46.)
(In Texas, if you request a surrender 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 Contract 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 and the partial surrender amount may not
exceed the Cash Surrender Value, less $300. We will assess a Partial Surrender
Fee. (See "Partial Surrender Fee," page 24.) We will deduct this charge from
your Contract Value along with the amount requested to be surrendered and the
charge will be considered part of the surrender (together, "partial surrender
amount"). We will reduce the Contract Value by the partial surrender amount as
of the date we receive a written request for a partial surrender.
When you request a partial surrender, you can direct how we deduct the partial
surrender amount from your Contract Value in the Subaccounts and Fixed Account.
If you provide no directions, we will deduct the partial surrender amount from
your Contract Value in the Subaccounts and Fixed Account on a pro-rata basis.
(See "Minimum Guaranteed and Current Interest Rates," page 20.) Partial
surrenders may have adverse tax consequences. (See "Tax Considerations," page
46.)
If Coverage Option A is in effect, we 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, we will not reduce the Specified Amount. We
reserve the right to reject a partial surrender request if: o the partial
surrender would reduce the Specified Amount below the minimum amount for which
the Contract would be issued
under our then-current rules, or
o the partial surrender would cause the Contract to fail to qualify as a life
insurance contract under applicable tax laws as we interpret them. 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 28.
We will process partial surrender requests as of the date we receive your
written request and generally we will make payment within seven calendar days.
(See "Payment of Proceeds," page 43.)
Maturity Benefit
The Maturity Date is the date that we pay the maturity benefit to you if the
Contract is still in force. The Maturity Date is the Contract Anniversary next
following the Insured's 95th birthday. The Maturity Benefit is equal to the Cash
Surrender Value on the Maturity Date.
Payment Options
The Contract offers a variety of ways, in addition to a lump sum, for you to
receive proceeds payable under the Contract. Payment options are available for
use with various types of proceeds, such as surrender, death or maturity. We
summarize these payment options below. All of these options are forms of
fixed-benefit annuities which don't vary with the investment performance of a
separate account.
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. We will pay interest on the proceeds at the
guaranteed rate of 3.0% per year and we may increase this by additional interest
paid annually. You may withdraw the proceeds and any unpaid interest 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. We will pay
interest on the proceeds at the guaranteed rate of 3.0% per year and we may
increase this by additional interest. The present value of any unpaid
installments may be withdrawn at any time.
Option 3 - Installments For a Specified Period. We pay proceeds in equal
annual or monthly payments for a specified number of years. We will pay interest
on the proceeds at the guaranteed rate of 3.0% per year and we may increase this
by additional interest. You may withdraw the present value of any unpaid
installments at any time.
Option 4 - Life Income. We pay an income during the payee's lifetime. You
may choose a minimum guaranteed payment period. Another option available in this
category is the Installment Refund Option under which we will make payments
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. We reserve the right to pay the total amount of the
Contract in one lump sum, if less than $2,000. If payments under the Payment
Option selected are less than $50, payments may be made less frequently at our
option.
If we have options or rates available on a more favorable basis at the time you
elect a payment option, we will apply the more favorable benefits .
Specialized Uses of the Contract
Because the Contract provides for an accumulation of cash value as well as a
Death Benefit, the Contract can be used for various individual and business
financial planning purposes. Purchasing the Contract in part for such purposes
entails certain risks. For example, if the investment performance of Subaccounts
to which Variable Account Value is allocated is poorer than expected or if
sufficient premiums are not paid, the Contract may lapse or may not accumulate
enough value to fund the purpose for which you purchased the Contract. Partial
surrenders and Contract loans may significantly affect current and future values
and proceeds. A loan may cause a Contract to lapse, depending upon Subaccount
investment performance and the amount of the loan. Before purchasing a Contract
for a specialized purpose, you should consider whether the long-term nature of
the Contract is consistent with the purpose for which you are considering it.
Using a Contract for a specialized purpose may have tax consequences. (See "Tax
Considerations" on page 46.)
ILLUSTRATIONS
We have prepared the following tables to illustrate hypothetically how certain
values under a Contract change with investment performance over an extended
period of time. The tables illustrate how Contract Values, Cash Surrender Values
and Death Benefits under a Contract covering an Insured of a given age would
vary over time if planned premium payments were paid annually and the return on
the assets in each of the Funds were an assumed uniform gross annual rate of 0%,
6% and 12%. The values would be different from those shown if the returns
averaged 0%, 6% or 12% but fluctuated over and under those averages throughout
the years shown. The tables also show Planned Periodic Premiums accumulated at
5% interest compounded annually.
Assumptions
The hypothetical investment rates of return are illustrative only. Don't assume
they are representative 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 you make, prevailing interest rates and
rates of inflation. These illustrations assume that you allocate premiums
equally among the 14 Subaccounts available under the Contract, and that you
allocate no amounts to the Fixed Account. We have based these illustrations on
the following assumptions: o there are no Contract loans , o an annual premium
is paid at the beginning of each Contract Year. Values
will be different if the premiums are paid with a different frequency or in
different amounts.
Charges Illustrated
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 0.90% of the
average daily net assets of the Portfolios available under the Contracts. This
average annual expense ratio is based on the expense ratios of each of the
Portfolios for the last fiscal year, adjusted, as appropriate, for any material
changes in expenses effective for the current fiscal year of a Portfolio. For
information on the Portfolios' expenses, see the prospectuses for the Funds and
Portfolios accompanying this Prospectus.
In addition, the illustrations reflect the daily charge to the Variable Account
for assuming mortality and expense risks, which is equivalent to an annual
charge of 0.90%. After deduction of Portfolio expenses and the mortality and
expense risk charge, the illustrated gross annual investment rates of return of
0%, 6% and 12% corresponds to approximate net annual rates of ____%, ____% and
____%, 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. We have the contractual right to charge higher guaranteed maximum
charges than our 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 at our sole
discretion. The current cost of insurance charges and payment of the bonus
beginning in the eleventh Contract Year and, alternatively, the guaranteed cost
of insurance charges and nonpayment of the bonus, are reflected in separate
illustrations on each of the following pages. All the illustrations reflect the
fact that no charges for Federal 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, we will furnish you with a comparable illustration
based upon the proposed Insured's individual circumstances. Such illustrations
may assume different hypothetical rates of return than those illustrated in the
following tables.
<TABLE>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION A
USING CURRENT COST OF INSURANCE RATES
Male, Standard Nonsmoker, Age 35
<CAPTION>
0% 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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 X X X X X X X X X
2 2,153 X X X X X X X X X
3 3,310 X X X X X X X X X
4 4,526 X X X X X X X X X
5 5,802 X X X X X X X X X
6 7,142 X X X X X X X X X
7 8,549 X X X X X X X X X
8 10,027 X X X X X X X X X
9 11,578 X X X X X X X X X
10 13,207 X X X X X X X X X
15 22,657 X X X X X X X X X
20 34,719 X X X X X X X X X
25 50,113 X X X X X X X X X
30 69,761 X X X X X X X X X
</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.
<PAGE>
<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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 X X X X X X X X X
2 2,153 X X X X X X X X X
3 3,310 X X X X X X X X X
4 4,526 X X X X X X X X X
5 5,802 X X X X X X X X X
6 7,142 X X X X X X X X X
7 8,549 X X X X X X X X X
8 10,027 X X X X X X X X X
9 11,578 X X X X X X X X X
10 13,207 X X X X X X X X X
15 22,657 X X X X X X X X X
20 34,719 X X X X X X X X X
25 50,113 X X X X X X X X X
30 69,761 X X X X X X X X X
</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.
<PAGE>
<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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 X X X X X X X X X
2 2,153 X X X X X X X X X
3 3,310 X X X X X X X X X
4 4,526 X X X X X X X X X
5 5,802 X X X X X X X X X
6 7,142 X X X X X X X X X
7 8,549 X X X X X X X X X
8 10,027 X X X X X X X X X
9 11,578 X X X X X X X X X
10 13,207 X X X X X X X X X
15 22,657 X X X X X X X X X
20 34,719 X X X X X X X X X
25 50,113 X X X X X X X X X
30 69,761 X X X X X X X X X
</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.
<PAGE>
<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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 X X X X X X X X X
2 2,153 X X X X X X X X X
3 3,310 X X X X X X X X X
4 4,526 X X X X X X X X X
5 5,802 X X X X X X X X X
6 7,142 X X X X X X X X X
7 8,549 X X X X X X X X X
8 10,027 X X X X X X X X X
9 11,578 X X X X X X X X X
10 13,207 X X X X X X X X X
15 22,657 X X X X X X X X X
20 34,719 X X X X X X X X X
25 50,113 X X X X X X X X X
30 69,761 X X X X X X X X X
</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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 X X X X X X X X X
2 2,153 X X X X X X X X X
3 3,310 X X X X X X X X X
4 4,526 X X X X X X X X X
5 5,802 X X X X X X X X X
6 7,142 X X X X X X X X X
7 8,549 X X X X X X X X X
8 10,027 X X X X X X X X X
9 11,578 X X X X X X X X X
10 13,207 X X X X X X X X X
15 22,657 X X X X X X X X X
20 34,719 X X X X X X X X X
25 50,113 X X X X X X X X X
30 69,761 X X X X X X X X X
</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.
<PAGE>
<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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 X X X X X X X X X
2 2,153 X X X X X X X X X
3 3,310 X X X X X X X X X
4 4,526 X X X X X X X X X
5 5,802 X X X X X X X X X
6 7,142 X X X X X X X X X
7 8,549 X X X X X X X X X
8 10,027 X X X X X X X X X
9 11,578 X X X X X X X X X
10 13,207 X X X X X X X X X
15 22,657 X X X X X X X X X
20 34,719 X X X X X X X X X
25 50,113 X X X X X X X X X
30 69,761 X X X X X X X X X
</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.
<PAGE>
<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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 X X X X X X X X X
2 2,153 X X X X X X X X X
3 3,310 X X X X X X X X X
4 4,526 X X X X X X X X X
5 5,802 X X X X X X X X X
6 7,142 X X X X X X X X X
7 8,549 X X X X X X X X X
8 10,027 X X X X X X X X X
9 11,578 X X X X X X X X X
10 13,207 X X X X X X X X X
15 22,657 X X X X X X X X X
20 34,719 X X X X X X X X X
25 50,113 X X X X X X X X X
30 69,761 X X X X X X X X X
</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.
<PAGE>
<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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 X X X X X X X X X
2 2,153 X X X X X X X X X
3 3,310 X X X X X X X X X
4 4,526 X X X X X X X X X
5 5,802 X X X X X X X X X
6 7,142 X X X X X X X X X
7 8,549 X X X X X X X X X
8 10,027 X X X X X X X X X
9 11,578 X X X X X X X X X
10 13,207 X X X X X X X X X
15 22,657 X X X X X X X X X
20 34,719 X X X X X X X X X
25 50,113 X X X X X X X X X
30 69,761 X X X X X X X X X
</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.
<PAGE>
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), we may not contest it unless it lapses.
We will not contest any increase in the Specified Amount 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) unless the
Contract lapses.
If a Contract lapses and is reinstated, we cannot contest the reinstated
Contract after it 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) unless the Contract lapses.
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 will be equal to the Contract Value less any Indebtedness.
If the Insured dies by suicide, while sane or insane, within two years after the
effective date of any increase in the Specified Amount (or less if required by
state law), the amount payable associated with such increase will be limited to
the cost of insurance charges associated with the increase.
Changes in the Contract or Benefits
Misstatement of Age or Sex. If, it is determined that the Age or sex of the
Insured as stated in the Contract is not correct, while the Contract is in force
and the Insured is alive, we will adjust the Contract Value. The adjustment will
be the difference between the following amounts accumulated at 4% interest
annually (unless otherwise required by state law). The two amounts are: (1) the
cost of insurance deductions that have been made, and (2) the cost of insurance
deductions that should have been made.
If, after the death of the Insured while this Contract is in force, it is
determined the Age or sex of the Insured as stated in the Contract is not
correct, the Death Benefit will be the net amount at risk that the most recent
cost of insurance deductions at the correct Age and sex would have provided plus
the Contract Value on the date of death (unless otherwise required by state
law).
Other Changes. Upon notice to you, we may modify the Contract. We can only do so
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 we are 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.
We reserve the right to modify the Contract as necessary to attempt to prevent
you from being considered the owner of the assets of the Variable Account. In
the event of any such modification, we will issue an appropriate endorsement to
the Contract, if required. We will exercise these changes in accordance with
applicable law, including approval of Contract Owners if required.
<PAGE>
Payment of Proceeds
We will ordinarily pay proceeds within seven calendar days after we receive all
the documents required for such a payment at our Home Office.
We determine the amount of the Death Benefit proceeds as of the date of the
Insured's death. But we determine the amount of all other proceeds as of the
date we receive the required documents. We may delay making a payment or
processing a transfer request for the following reasons if:
1. the New York Stock Exchange is closed for other than a regular holiday
or weekend,
2. 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 practical, or
3. the SEC, by order, permits postponement of payment to protect Kansas
City Life's Contract Owners.
Personal Growth Account. Under certain circumstances and in accordance with
established administrative procedures, we will pay Death Benefit proceeds
through Kansas City Life's Personal Growth Account. This account bears interest.
We place proceeds to be paid through the Personal Growth Account in our general
account. The Personal Growth Account provides check-writing privileges under
which we reimburse the bank that pays the check 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) has immediate and full access to
Proceeds by writing a check on the account. We pay interest on Death Benefit
Proceeds from the date of death to the date the Personal Growth Account is
closed.
Reports to Contract Owners
At least once each Contract Year, we will send you a report showing updated
information about the Contract since the last report, including any information
required by law. We will also send you an annual and semi-annual report for each
Fund or Portfolio underlying a Subaccount to which you have allocated Contract
Value. This will include a list of the securities held in each Fund, as required
by the 1940 Act. In addition, we will send you written confirmation of all
Contract transactions.
Assignment
You may assign the Contract in accordance with its terms. In order for any
assignment to bind us, it must be in writing and filed at the Home Office. When
we receive a signed copy of the assignment, your rights and the interest of any
Beneficiary (or any other person) will be subject to the assignment. We assume
no responsibility for the validity or sufficiency of any assignment. An
assignment is subject to any Indebtedness. We will send notices to any assignee
we have on record concerning amounts required to be paid during a grace period
in addition to sending these notices to you.
Reinstatement
If your Contract lapses, you may reinstate it within two years (or longer period
if required by state law) after lapse and before the Maturity Date.
Reinstatement must meet certain conditions, including the payment of the
required premium and proof 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. We will deduct monthly charges for these benefits and/or
riders from your Contract Value as part of the Monthly Deduction. All of these
riders may not be available in all states.
Disability Continuance of Insurance (DCOI)
Issue Ages: 15-55, renewal through age 59
This rider covers the Contract's Monthly Deductions during the period of
total disability of the Insured. DCOI benefits become payable after the
Insured's total disability exists for six consecutive months and total
disability occurs before age 60. Benefits under this rider continue until
the Insured is no longer totally disabled.
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 you request.
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.
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 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.
Maturity Extension Rider (MER)
Issue Ages: No restrictions
This rider provides the Contract owner with the option to delay the
Maturity Date of the Contract by 20 years. The tax consequences of extending the
Maturity Date of the Contract beyond the 100th birthday of the Insured are
uncertain. You should consult a tax adviser as to such consequences..
Accelerated Death Benefit/Living Benefits Rider (LBR)
Issue Ages: No restrictions
This rider provides you the opportunity to receive an accelerated payment
of all or part of of the Contract's Death Benefit (adjusted to reflect
current value) when the Insured is either terminally ill or receives care
in an eligible nursing home. The rider provides for two accelerated payment
options:
o Terminal Illness Option: This option is available if the Insured is
diagnosed as terminally ill with a life expectancy of 12 months or
less. When satisfactory evidence is provided, we will provide an
accelerated payment of the portion of the death benefit you select as
an Accelerated Death Benefit. You may elect to receive the benefit in a
single sum or receive equal, monthly payments for 12 months.
o Nursing Home Option: This option is available after the Insured has
been confined to an eligible nursing home for six months or more. When
satisfactory evidence is provided, including certification by a
licensed physician, that the Insured is expected to remain in the
nursing home until death, we will provide an accelerated payment of the
portion of the Death Benefit you select as an Accelerated Death
Benefit. You may elect to receive the benefit in a single sum or
receive equal, monthly payments for a specified number of years (not
less than two) depending upon the age of the Insured.
We can furnish you details about the amount of accelerated death benefit
available to you if you are eligible and the adjusted premium payments that
would be in effect if less than the entire death benefit is accelerated.
You are not eligible for this benefit if you are required by law or a
government agency to: (1) exercise this option to satisfy the claims of
creditors, or (2) exercise this option in order to apply for, obtain, or retain
a government benefit or entitlement.
You should know that electing to use the Accelerated Death Benefit could
have adverse tax consequences. You should consult a tax advisor before
electing to receive this benefit.
There is no charge for this rider.
The Other Insured Term Insurance and Extra Protection riders permit you, by
purchasing term insurance, to increase insurance coverage without increasing the
Contract's Specified Amount. However, you should be aware that the cost of
insurance charges and Surrender Charges associated with purchasing insurance
coverage under these term riders may be different than would be associated with
increasing the Specified Amount under the Contract.
The Other Insured rider has one risk class for nonsmokers and one risk class for
smokers. The nonsmoker cost of insurance rates for this rider are generally
between the Contract's preferred and standard nonsmoker rates. The smoker cost
of insurance rates are near the Contract's smoker rates. The cost of insurance
rates for the Extra Protection Rider are generally lower than the Contract's
rates. In addition, since the term insurance riders don't have surrender
charges, a Contract providing insurance coverage with a combination of Specified
Amount and term insurance will have a lower maximum Surrender Charge than a
Contract with the same amount of insurance coverage provided solely by the
Specified Amount. In addition, sales representatives generally receive somewhat
lower compensation from a term insurance rider than if the insurance coverage
were part of the Contract's Specified Amount.
Your determination as to how to purchase a desired level of insurance coverage
should be based on your specific insurance needs. Consult your sales
representative for further information.
Additional rules and limits apply to these supplemental and/or rider benefits.
Not all such benefits may be available at any time, and supplemental and/or
rider benefits in addition to those listed above may be made available. Please
ask your Kansas City Life agent for further information or contact the Home
Office.
TAX CONSIDERATIONS
Introduction
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 tax situations. This discussion is not intended as
tax advice. You should consult counsel or other competent tax advisers for more
complete information. This discussion is based upon our understanding of the
present Federal income tax laws. We make no representation is made as to the
likelihood of continuation of the present Federal income tax laws or as to how
they may be interpreted by the Internal Revenue Service.
Tax Status of the Contract
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Contract must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited. Nevertheless, we believe that
Contracts issued on a standard basis should satisfy the applicable requirements.
There is less guidance, however, with respect to Contracts issued on a
substandard basis, particularly if you pay the full amount of premiums permitted
under the Contract. If it is subsequently determined that a Contract does not
satisfy the applicable requirements, we may take appropriate steps to bring the
Contract into compliance with such requirements and we reserve the right to
restrict Contract transactions as necessary in order to do so.
In certain circumstances, owners of variable life insurance contracts
have been considered for Federal income tax purposes to be the owners of the
assets of variable account supporting their contracts due to their ability to
exercise investment control over those assets. Where this is the case, the
Owners have been currently taxed on income and gains attributable to variable
account assets. There is little guidance in this area, and some features of the
Contracts, such as the flexibility of an Owner to allocate premium payments and
Contract Value, have not been explicitly addressed in published rulings. While
we believe that the Contracts do not give Owners investment control over
Variable Account assets, we reserve the right to modify the Contracts as
necessary to prevent an Owner from being treated as the owner of a pro rata
share of the assets of the Subaccounts.
In addition, the Code requires that the investments of each of the
Subaccounts must be "adequately diversified" in order for the Contract to be
treated as a life insurance contract for Federal income tax purposes. It is
intended that the Subaccounts, through the Portfolios, will satisfy these
diversification requirements.
The following discussion assumes that the Contract will qualify as a
life insurance contract for Federal income tax purposes.
<PAGE>
- 55 -
Tax Treatment of Contract Benefits
In General. We believe that the Death Benefit under a Contract should be
excludible from the gross income of the beneficiary.
Generally, the Owner will not be deemed to be in constructive receipt
of the Contract Value until there is a distribution. When distributions from a
Contract occur, or when loans are taken out from or secured by a Contract, the
tax consequences depend on whether the Contract is classified as a "Modified
Endowment Contract."
Modified Endowment Contracts. Under the Internal Revenue Code, certain
life insurance contracts are classified as "Modified Endowment Contracts," with
less favorable tax treatment than other life insurance contracts. Due to the
flexibility of the Contracts as to premiums and benefits, the individual
circumstances of each Contract will determine whether it is classified as a
Modified Endowment Contract. The rules are too complex to be summarized here,
but generally depend on the amount of premiums paid during the first seven
Contract years. Certain changes in a Contract after it is issued could also
cause it to be classified as a Modified Endowment Contract. A current or
prospective Owner should consult with a competent adviser to determine whether a
Contract transaction will cause the Contract to be classified as a Modified
Endowment Contract.
Distributions (Other Than Death Benefits) from Modified Endowment
Contracts. Contracts classified as Modified Endowment Contracts are subject to
the following tax rules:
(1) All distributions other than Death Benefits, including
distributions upon surrender and withdrawals, from a Modified
Endowment Contract will be treated first as distributions of
gain taxable as ordinary income and as tax-free recovery of
the Owner's investment in the Contract only after all gain has
been distributed.
(2) Loans taken from or secured by a Contract classified as a
Modified Endowment Contract are treated as distributions and
taxed accordingly.
(3) A 10 percent additional income tax is imposed on the amount
subject to tax except where the distribution or loan is made
when the Owner has attained age 59 1/2 or is disabled, or
where the distribution 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 or designated
beneficiary.
<PAGE>
Distributions (Other Than Death Benefits) from Contracts that are not
Modified Endowment Contracts. Distributions (other than Death Benefits) from a
Contract that is not classified as a Modified Endowment Contract are generally
treated first as a recovery of the Owner's investment in the Contract and only
after the recovery of all investment in the Contract as taxable income. However,
certain distributions which must be made in order to enable the Contract to
continue to qualify as a life insurance contract for Federal income tax purposes
if Contract benefits are reduced during the first 15 Contract years may be
treated in whole or in part as ordinary income subject to tax.
Loans from or secured by a Contract that is not a Modified Endowment
Contract are generally not treated as distributions. However, the tax
consequences associated with Contract loans that are outstanding after the first
10 Contract years is less clear and you should consult a tax adviser about such
loans.
Finally, neither distributions from nor loans from or secured by a
Contract that is not a Modified Endowment Contract are subject to the 10 percent
additional income tax.
Investment in the Contract. Your investment in the Contract is
generally your aggregate Premiums. When a distribution is taken from the
Contract, your investment in the Contract is reduced by the amount of the
distribution that is tax-free.
Contract Loans. In general, interest on a Contract loan will not be
deductible. Before taking out a Contract loan, you should consult a tax adviser
as to the tax consequences.
Multiple Contracts. All Modified Endowment Contracts that are issued by
Kansas City Life (or its affiliates) to the same Owner during any calendar year
are treated as one Modified Endowment Contract for purposes of determining the
amount includible in the Owner's income when a taxable distribution occurs.
Other Owner Tax Matters. Federal, state and local transfer, estate,
inheritance, and other tax consequences of ownership or receipt of Contract
proceeds depend on the circumstances of each Owner or beneficiary. You should
consult a tax advisor as to these consequences.
The tax consequences of continuing the Contract beyond the Insured's
100th year are unclear. You should consult a tax adviser if you intend to keep
the Contract in force beyond the Insured's 100th year.
The Contracts can be used in various arrangements, including
nonqualified deferred compensation or salary continuance plans, split dollar
insurance plans, executive bonus plans, tax exempt and nonexempt welfare benefit
plans, retiree medical benefit plans and others. The tax consequences of such
arrangements may vary depending on the particular facts and circumstances. If
you are purchasing the Contract for any arrangement the value of which depends
in part on its tax consequences, you should consult a qualified tax adviser. In
recent years, moreover, Congress has adopted new rules relating to life
insurance owned by businesses. Any business contemplating the purchase of a new
Contract or a change in an existing Contract should consult a tax adviser.
<PAGE>
Our Income Taxes
At the present time, we make no charge for any Federal, state or local
taxes (other than the premium expense charge ) that we incur that may be
attributable to the Subaccounts or to the Contracts. We do have 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 we determine is attributable
to the Subaccounts or the Contracts.
Under current laws in several states, we may incur state and local
taxes (in addition to premium taxes). These taxes are not now significant and we
are not currently charging for them. If they increase, we may deduct charges for
such taxes.
Possible Tax Law Changes
Although the likelihood of legislative changes is uncertain, there is
always the possibility that the tax treatment of the Contract could change by
legislation or otherwise. Consult a tax adviser with respect to legislative
developments and their effect on the Contract.
OTHER INFORMATION ABOUT THE CONTRACTS AND KANSAS CITY LIFE
Sale of the Contracts
We will offer the Contracts to the public on a continuous basis. We don't plan
to discontinue offering of the Contracts, but , we reserve the right to do so.
Applications for Contracts are solicited by agents who are licensed by state
insurance authorities to sell our variable life contracts. They are generally
registered representatives of Sunset Financial Services, Inc. ("Sunset
Financial"), one of our wholly-owned subsidiaries. It is also possible that
these agents are instead registered representatives of broker-dealers who have
entered into written sales agreements with Sunset Financial. Sunset Financial is
registered with the SEC under the Securities Exchange Act of 1934 as a
broker-dealer and is a member of the National Association of Securities Dealers,
Inc.
Sunset Financial acts as the Principal Underwriter, as defined in the 1940 Act,
of the Contracts for the Variable Account as described in 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.
Sunset Financial may pay registered representatives commissions on Contracts
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. In certain circumstances Sunset Financial may pay additional commissions,
other allowances and overrides.
When policies are sold through other broker-dealers that have entered into
selling agreements with Sunset Financial Services, the commission 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 year for approved expenses. 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
You may request a transfer of Contract Value, change in premium allocation
or Contract loan by telephone, provided you made the appropriate election at the
time of application or provided proper authorization to us. We reserve the right
to suspend these telephone privileges at any time 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. If we follow those procedures, we will not be liable
for any losses due to unauthorized or fraudulent instructions. The procedures we
will follow for telephone privileges 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. Director of Sunset Life and Old American Insurance Company, subsidiaries
of Kansas City Life.
Walter E. Bixby Director, Kansas City Life; Vice Chairman of the Board since
1974; President and CEO from 1990 until he retired in April, 1998. 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 Senior Vice President,
Operations in 1990; Executive Vice President in 1996 and President and CEO in
April, 1998. Primarily responsible for the operation of the Company.
W. E. Bixby, III Director, Kansas City Life; Director and President of Old
American Insurance Company, a subsidiary of Kansas City Life. Director of Sunset
Life, a subsidiary of Kansas City Life.
Charles R. Duffy Jr. Elected Vice President, Insurance Administration in
November, 1989; ; Senior Vice President, Operations since 1996; responsible for
Computer Information Systems, Customer Services, Claims and Agency
Administration. Director of Sunset Life and Old American, subsidiaries of Kansas
City Life.
Richard L. Finn Director, Kansas City Life; Senior Vice President, Finance,
since 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 and Director and Treasurer of Sunset Life,
subsidiaries of Kansas City Life.
Jack D. Hayes Director, Kansas City Life; Elected Senior Vice President,
Marketing since 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; Senior Vice President and Actuary
since 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; Vice President, General Counsel
and Secretary since 1991. Responsible for Legal Department, Office of the
Secretary, Stock Transfer Department and Market Compliance. Director and
Secretary of Sunset Life and Old American, subsidiaries of Kansas City Life.
Robert C. Miller Senior Vice President, Administrative Services, since 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; Vice Chairman of the Board and
President, Sunset Life Insurance Company of America, a subsidiary of Kansas City
Life, since 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.
Elizabeth T. Solberg Director, Kansas City Life since 1997; Executive Vice
President and Senior Partner, Fleishman-Hilliard, Inc. since 1984.
Larry Winn Jr. Director, Kansas City Life since 1985; Retired as the Kansas
Third District Representative to the U.S. Congress.
John K. Koetting Vice President and Controller since 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
We are regulated by the Department of Insurance of the State of Missouri, which
periodically examines our financial condition and operations. We are also
subject to the insurance laws and regulations of all jurisdictions where we do
business.
Additional Information
We have filed a registration statement under the Securities Act of 1933 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
Ernst & Young, LLP, independent auditors has audited the following reports
included in this prospectus: o consolidated balance sheets for Kansas City Life
at December 31, 1998 and 1997, o related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1998,
o statement of net assets of the Variable Account at December 31, 1998,
o related statements of operations and changes in net assets for the years
ended December 31, 1998 and December 31, 1997 and for the period from
January 26, 1996 (inception) to December 31, 1996.
The Independent Auditor's Report is also included in this Prospectus and is
provided in reliance upon these reports.
Mark A. Milton, Vice President and Associate Actuary of Kansas City Life has
examined actuarial matters in this Prospectus.
Litigation
We and our affiliates, like other life insurance companies, are involved in
lawsuits, including class action lawsuits. In some class action and other
lawsuits involving insurers, substantial damages have been sought and/or
material settlement payments have been made. Although the outcome of any
litigation cannot be predicted with certainty, we believe that at the present
time there are not pending or threatened lawsuits that are reasonably likely to
have a material adverse impact on the Variable Account or Kansas City Life.
Preparing for Year 2000
We are closely monitoring our ability and the ability of our primary vendors and
business partners to successfully operate in the year 2000. We are assessing and
taking steps to resolve potential problems in both our information technology
systems and other systems. As of December 31, 1998 we were about 85% complete as
far as addressing the information technology systems. Our other systems are,
with one exception, year 2000 compliant. We will address the system that is not
compliant during 1999. We are also actively monitoring the compliance programs
of third parties with which we have business relationships and are developing
contingency plans based on those assessments.
We expect to have contingency plans in place and internal systems year 2000
compliant by the end of 1999. We base this expectation on numerous assumptions
of future events. We cannot be sure that these assumptions are accurate and
actual results could differ from expected results.
Legal Matters
Sutherland, Asbill & Brennan of Washington, D.C. has provided advice on certain
matters relating to the federal securities laws. C. John Malacarne, General
Counsel of Kansas City Life has passed on matters of Missouri law pertaining to
the Contracts, including our right to issue the Contracts and our qualification
to do so under applicable laws and regulations.
Financial Statements
Kansas City Life's financial statements included in this Prospectus should be
distinguished from financial statements of the Variable Account. You should
consider Kansas City Life's financial statements only as an indication of Kansas
City Life's ability to meet its obligations under the Contracts. You should not
consider them as having an effect on the investment performance of the assets
held in the Variable Account. The following reports for the Variable Account are
also included in the Prospectus: o statement of net assets of the Variable
Account at December 31, 1998, and o related statement of operations and changes
in net assets for the periods ended December 31, 1998 and December 31, 1997 and
for the period from January 29, 1996 (inception), to December 31, 1996.
GLOSSARY OF TERMS
Accumulation Unit An accounting unit used to measure the net investment results
of each of the Subaccounts.
Age The Insured's age on his/her last birthday as of or on each Contract
Anniversary. The Contract is issued at the Age shown in the Contract.
Allocation Date The date we apply your initial premium to your Contract. We
allocate this premium to the Federated Prime Money Fund II Subaccount where
it remains until the Reallocation Date. The Allocation Date is the later of
the date we approve your application or the date we receive the initial
premium at our Home Office.
Beneficiary The person you designate to receive any proceeds payable at the
death of the Insured.
Cash Surrender Value The Contract Value 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 takes effect. Contract Months, Years
and Anniversaries are measured from the Contract Date.
Contract Value Measure of the value in your Contract. It is the sum of the
Variable Account Value and the Fixed Account Value which includes the Loan
Account Value.
Contract Year Any period of twelve months starting with the Contract Date or any
Contract Anniversary.
Coverage Options Death Benefit options available which affect the calculation of
the Death Benefit. Option A provides a Death Benefit at least equal to the
Specified Amount. Option B provides a Death Benefit at least equal to the
Specified Amount plus the Contract Value.
Death Benefit Proceeds The amount of Proceeds payable upon the Insured's death.
FixedAccount An account that is one option we offer for allocation of your
premiums. It is part of our general account and is not part of or dependent
on the investment performance of the Variable Account. It also includes any
value in the Loan Account.
Fixed Account Value Measure of value accumulating in the Fixed Account.
GracePeriod A 61-day period we provide when there is insufficient value in your
Contract and the Contract will terminate unless you pay additional
premiums. This period of time gives you the chance to pay enough premiums
to keep your Contract in force.
Guaranteed Monthly Premium A premium amount which when paid guarantees that your
Contract will not lapse during the Guaranteed Payment Period.
Guaranteed Payment Period The period of time during which we guarantee that your
Contract will not lapse if you pay the Guaranteed Monthly Premiums.
Home Office 3520 Broadway, P.O. Box 419364, Kansas City, Missouri 64141-6364.
Indebtedness The sum of all outstanding Contract loans plus accrued interest.
Insured The person whose life we insure under the Contract.
LapseTermination of the Contract because there is not enough value in the
Contract when the Grace Period ends.
Loan Account The Loan Account is used to track loan amounts and accrued
interest. It is part of the Fixed Account.
Loan Account Value Measure of the amount of Contract Value assigned to the Loan
Account.
Maturity Date The date when Death Benefit coverage terminates and we pay any
Cash Surrender Value to you.
Monthly Anniversary Day The day of each month on 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 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. We
make the Monthly Deduction as of each Monthly Anniversary Day.
Net Investment Factor An index used to measure Subaccount performance.
Calculation of the Net Investment Factor is described on page 26.
Owner, You The person entitled to exercise all rights and privileges of the
Contract.
Planned Premium Payments The amount and frequency of premium payments you chose
to pay in your last application. This is the amount we will bill you. It is
only an indication of your preferences of future premium payments.
Premium/ Premium Payment(s) The amount(s) you pay to purchase the Contract. It
includes both Planned Premium Payments and unscheduled premiums.
Proceeds The total amount we are obligated to pay.
Reallocation Date The date on which the Contract Value we allocated to the
Federated Prime Money Fund II Subaccount on the Allocation Date is
allocated to the Subaccounts and/or to the Fixed Account. We allocate the
Contract Value based on the premium allocation percentages you specify 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 divisions of the Variable Account. The assets of each Subaccount
are invested in a portfolio of a designated mutual fund.
Subaccount Value Measure of the value in a particular 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 beginning at the close of business on one
Valuation Day and ending at the close of business on the next Valuation
Day.
Variable Account The Kansas City Life Variable Life Separate Account.
Variable Account Value Measure of the value in a Contract's Subaccounts. The
Variable Account Value is equal to the sum of all Subaccount Values of a
Contract.
We, Our, Us Kansas City Life Insurance Company.
Written Notice A written notice in a form satisfactory to us that is signed by
the Owner and received at the Home Office.
Supplement Dated May 1, 1999,
to Prospectus Dated May 1, 1999
Kansas City Life Variable Life Separate Account
Variable Universal Life Contract
Connecticut
For contracts sold in the state of Connecticut, we change the prospectus as
follows to provide for the Right to Exchange provision.
Delete the "Special Transfer Right" shown on page 22 of the prospectus
and replace with the following:
Right to Exchange -- The Right to Exchange provision allows you to
exchange the Contract to one that provides benefits that don't vary
based on the performance of Funds. Once within the first 24 months of
the Contract or within 24 months following the effective date of an
increase to the Specified Amount, you 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.
5630 5-99a
Supplement Dated May 1, 1999,
to Prospectus Dated May 1, 1999
Kansas City Life Variable Life Separate Account
Variable Universal Life Contract
Maryland
For contracts sold in the state of Maryland, we change the prospectus as
follows:
Add the definition for "No-Lapse monthly Premium" and "No-Lapse Payment
Period" to page 6 of the prospectus. These definitions are:
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 you pay the No-Lapse Monthly
Premiums.
Add the following wording 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 we guarantee that the Contract will not lapse if the amount of
total premiums you pay is greater than or equal to the sum of:
(1) the accumulated No-Lapse Monthly Premiums in effect on each period
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 Period is fifteen years following the Contract
Date and fifteen years following the effective date of an increase in
the Specified Amount. The Contract shows the No-Lapse Monthly Premium.
The per $1,000 No-Lapse Monthly Premium factors for the Specified
Amount vary by risk class, issue age and sex. We include additional
premiums for substandard ratings and supplemental and/or rider benefits
in the No-Lapse Monthly Premium. However, upon a change to the
Contract, we will recalculate the No-Lapse Monthly Premium, will notify
you of the new No-Lapse Monthly Premium and amend your Contract to
reflect the change.
Add the following paragraph 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.
Delete the "After the Guaranteed Payment Period" section on page 20 of
the prospectus and replace it 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 he 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. You must pay a premium sufficient to provide a Cash
Surrender Value equal to three Monthly Deductions during the grace
period to keep the Contract is force.
Add the following paragraph to the "Changes in Specified Amount"
section on page 30 of the prospectus:
In addition, a new No-Lapse Payment Period begins on the effective date
of the increase and continues for fifteen years. We will recalculate
the Contract's No-Lapse Monthly Premium 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.
Delete the "Special Transfer Right" shown on page 21 of the prospectus
and replace it with the following:
Right to Exchange -- The Right to Exchange provision allows you to
exchange the Contract to one that provides benefits that don't vary
based on the performance of the Funds. Once within the first 24 months
following the Contract Date or within the first 24 months following the
effective date of an increase to the Specified Amount, you 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.
5629 5-99a
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 55 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
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.1
(2) Not applicable.
(3) Distributing Contracts:
(a) Distribution Agreement between Kansas City Life Insurance
Company and Sunset Financial Services, Inc.. 2
(b) Not applicable.
(c) Schedule of Sales Commissions. 6
(4) Not applicable.
(5) (a) Specimen Contract Form. 1
(b) Disability Continuance of Insurance Rider. 2
(c) Accidental Death Rider. 2
(d) Option to Increase Specified Amount Rider. 2
(e) Spouse's Term Insurance Rider. 2
(f) Children's Term Insurance Rider. 2
(g) Other Insured Term Insurance Rider. 2
(h) Extra Protection Rider. 2
(i) Disability Premium Benefit Rider. 2
(j) Temporary Life Insurance Agreement. 2
(k) Limited Aviation Rider. 2
(l) Unisex Contract Amendment. 2
(m) Extended Maturity Rider. 5
(n) Accelerated Death Benefit Rider.
(6) (a) Articles of Incorporation of Bankers Life Association of
Kansas City. 1
(b) Restated Articles of Incorporation of Kansas City Life
Insurance Company. 1
(c) By-Laws of Kansas City Life Insurance Company.1
(7) Not applicable.
(8) (a) Agreement between Kansas City Life Insurance Company, MFS
Variable Insurance Trust, and Massachusetts Financial
Services Company.1
(b) Agreement between Kansas City Life Insurance Company, TCI
Portfolios, Inc. and Investors Research Corporation.1
(c) Agreement between Kansas City Life Insurance Company,
Insurance Management Series, and Federated Securities Corp.1
(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. 5
(9) Not Applicable.
(10) Application Form.1
(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.
- ----------------------
1 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.
2 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.
3 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.
4 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.
5 Incorporated herein by reference to Post-Effective Amendment No. 3 of the
S-6 Registration Statement (File No. 33-95354) filing for Kansas City Variable
Life Separate Account filed on April 30, 1998.
6 To be filed by amendment.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Kansas City Life
Variable Life Separate Account certifies that it meets all of the requirements
of Securities Act Rule 485(a) for effectiveness of this Post-Effective
Amendment to its Registration Statement and has duly caused this Post-Effective
Amendment No. 4 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 25th day of January, 1999.
[SEAL] Kansas City Life
Variable Life Separate Account
Registrant
Kansas City Life Insurance Company
Depositor
Attest /s/ C. John Malacarne By: /s/ R. Philip Bixby
C. John Malacarne R. Philip Bixby, President, CEO &
Director
Pursuant to the requirements of the Securities Act of 1933, Post-Effective
Amendment No. 4 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/ R. Philip Bixby President, CEO and Director January 25, 1999
R. Philip Bixby
/s/ Richard L. Finn Senior Vice President, Finance January 25, 1999
Richard L. Finn Director
(Principal Financial Officer)
/s/ John K. Koetting Vice President and Controller January 25, 1999
John K. Koetting (Principal Accounting Officer)
/s/ J. R. Bixby Chairman of the Board and January 25, 1999
J.R. Bixby Director
Vice Chairman of the Board January 25, 1999
W. E. Bixby and Director
Director January 25, 1999
W. E. Bixby III
/s/Daryl D. Jensen Director January 25, 1999
Daryl D. Jensen
/s/ Francis P. Lemery Director January 25, 1999
Francis P. Lemery
/s/ C. John Malacarne Director January 25, 1999
C. John Malacarne
Director January 25, 1999
Jack D. Hayes
/s/ Webb R. Gilmore Director January 25, 1999
Webb R. Gilmore
/s/ Warren J. Hunzicker, M.D. Director January 25, 1999
Warren J. Hunzicker, M.D.
Director January 25, 1999
Michael J. Ross
Director January 25, 1999
Elizabeth T. Solberg
/s/ E. Larry Winn, Jr. Director January 25, 1999
E. Larry Winn, Jr.
/s/ Nancy Bixby Hudson Director January 25, 1999
Nancy Bixby Hudson
Exhibit Index List
1.A.(5)(n) Accelerated Death Benefit Rider.
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.
8. Undertaking.
Exhibit 1.A.(5)(n)
Accelerated Death Benefit Rider
ANY ACCELERATED BENEFITS PAID UNDER THIS RIDER MAY BE TAXABLE. IF SO, YOU OR
YOUR BENEFICIARY MAY INCUR A TAX OBLIGATION. AS WITH ALL TAX MATTERS, YOU SHOULD
CONSULT YOUR PERSONAL TAX ADVISOR TO ASSESS THE IMPACT OF THIS BENEFIT.
The Benefit
Kansas City Life Insurance Company will provide the opportunity for you to
receive payments of all or a portion of the contract's death benefit proceeds
prior to the death of the Insured if the Insured is terminally ill or receives
care in an eligible nursing home. Two payment options are available under this
rider:
(1) Terminal Illness Option; and
(2) Nursing Home Option.
The amount of payments varies depending upon the option under which you elect
payments. We describe these options and the payments available in more detail
below.
Definitions
The following are key words used in this rider. As you read this rider, refer to
these definitions.
Available Proceeds The amount of proceeds available to be paid out under
the Accelerated Death Benefit Rider. This amount is equal to the death
proceeds payable under the contract at the death of the Insured (adjusted
for any contract indebtedness). The amount excludes any term insurance from
supplementary benefits or riders. Benefit Base The value we will use to
calculate the monthly benefit payable. We will calculate it based on the
amount of available proceeds you elect to place under the option. We will
adjust this amount to account for a reduced life expectancy that recognizes
the Insured's eligibility for the benefit.
We will also consider, when applicable:
(1) expected future premiums;
(2) continued reduction in guaranteed charges;
(3) continued payment of any excess interest credited on values; and
(4) an expense charge of up to $250 for payment of the accelerated death
benefit proceeds. We may waive this expense charge.
The benefit base will be at least as great as the cash surrender value of
the contract multiplied by the percentage of the available proceeds placed
under the option of the Accelerated Death Benefit Rider you elect.
Eligible Nursing Home
An institution or special nursing unit of a hospital which meets at least
one of the following requirements:
(1) Medicare approved as a provider of skilled nursing care services; or
(2) licensed as a skilled nursing home or as an intermediate care facility by
the state in which it is located; or
(3) meets all the requirements listed below:
(a) licensed as a nursing home by the state in which it is located;
(b) main function is to provide skilled, intermediate, or custodial nursing
care;
(c) engaged in providing continuous room and board accommodations to 3 or more
persons;
(d) under the supervision of a registered nurse (RN) or licensed practical
nurse (LPN);
(e) maintains a daily medical record of each patient; and
(f) maintains control and records for all medications dispensed.
Institutions which primarily provide residential facilities do not qualify
as eligible nursing homes.
Terminal Illness Option
If you have a terminal illness, you may elect this option to provide equal
monthly payments for 12 months. In order to be eligible we must receive evidence
satisfactory to us. This includes a certification by a licensed physician that
the Inusred's life expectancy is 12 months or less. For each $1,000 of benefit
base, each payment will be at least $85.21, which assumes an annual interest
rate of 5%.
If the Insured dies before we have made all the payments, we will pay the
beneficiary in one sum the present value of the remaining payments, calculated
at the interest rate we used to determine those payments.
If you do not wish to receive monthly payments, you may elect to receive a
single sum of equivalent value.
Nursing Home Option
If you are in a nursing home, you may elect level monthly payments for the
number of years shown in the table below. In order to exercise this option:
(1) the Insured must be receiving care in an eligible nursing home and must
have received such care continuously for the preceding six months; and
(2) we must receive certification by a licensed physician that the Insured is
expected to remain in the nursing home until death.
For each $1,000 of benefit base, each payment will be at least the minimum
amount shown in that table, which assumes an annual interest rate of 5%.
If the Insured dies before we have made all the payments, we will pay the
beneficiary in one sum the present value of the remaining payments, calculated
at the interest rate we used to determine those payments.
With our consent, you may elect a longer payment period than that shown in the
table. If you do, we will reduce monthly payments so that the present value of
the monthly payments for the longer payment period is equal to the present value
of the payments for the period shown in the table, calculated at an interest
rate of at least 5%.
We reserve the right to set a maximum monthly benefit of $5,000. We will advise
you of the amount before the payment period begins.
If you do not wish to receive monthly payments, you may elect to receive a
single sum of equivalent value.
ATTAINED AGE PAYMENT PERIOD MINIMUM MONTHLY PAYMENT FOR
OF INSURED IN YEARS EACH $1,000 OF BENEFIT BASE
64 and under 10 $10.50
65-67 8 $12.56
68-70 7 $14.02
71-73 6 $15.99
74-77 5 $18.74
78-81 4 $22.89
82-86 3 $29.80
87 and over 2 $43.64
Effect on Contract
We will reduce the available proceeds will be reduced by any amount used under
one of these options.
If you use only a portion of your available proceeds under one of these options,
the contract will remain in force and reduced premiums will be payable. We will
reduce premiums, values, and the amount of insurance in the same proportion as
the reduction in available proceeds. Term insurance amounts provided by
supplemental benefits or riders will be unaffected.
If you use only a portion of your available proceeds under the terminal illness
option or the nursing home option, the remaining available proceeds must be at
least $25,000.
If you use all of your available proceeds under the terminal illness option or
the nursing home option, all other benefits under the contract based on the
Insured's life will end.
Conditions
Your right to receive payment under any of these options is subject
to the following conditions:
(1) The contract must be in force and not have entered the grace period.
(2) You must elect the option in writing in a form that meets our requirements.
(3) The contract cannot be assigned except to us as security for a loan.
(4) We reserve the right to set a limit of $50,000 on the amount of available
proceeds you may place under an option.
(5) We may require you to send us the contract.
(6) The primary purpose of life insurance is to meet your estate planning
needs. This benefit provides for the accelerated payment of life insurance
proceeds and is not intended to cause you to involuntarily evade proceeds
ultimately payable to the named beneficiary. Therefore, we will make the
accelerated death benefit proceeds available to you on a voluntary basis
only. Accordingly:
(a) If you are required by law to exercise this option to satisfy the claims of
creditors, whether in bankruptcy or otherwise, you are not eligible for
this benefit.
(b) If you are required by a government agency to exercise this option in order
to apply for, obtain, or retain a government benefit or entitlement, you
are not eligible for this benefit.
General Provisions
This rider is a part of the contract to which it is attached and this benefit is
subject to all the provisions of this rider and the applicable contract
provisions.
Termination of Rider
This rider terminates on the earliest of:
(1) the date the contract terminates for any reason;
(2) the date this rider is cancelled by you;
(3) the date the contract matures; or
(4) the date you exercise a Paid-up Insurance Benefit option, if any, in the
contract.
Signed for Kansas City Life Insurance Company, a stock company, at its Home
Office, 3520 Broadway, PO Box 419139, Kansas City, MO 64141-6139.
/s/ C. J. Malacarne /s/R. P. Bixby
Secretary President
JANUARY 1999
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 rocessing 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 Li fe 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
bythe 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.
Accelerated Death Benefit/Living Benefits Rider (LBR)
Issue Ages: No age limitations
This rider provides you the opportunity to receive an accelerated
payment of all or part of of the Contract's Death Benefit (adjusted to
reflect current value) when the Insured is either terminally ill or
receives care in an eligible nursing home. The rider provides for two
accelerated payment options:
o Terminal Illness Option: This option is available if the
Insured is diagnosed as terminally ill with a life expectancy
of 12 months or less. When satisfactory evidence is provided,
we will provide an accelerated payment of the portion of the
death benefit you select as an Accelerated Death Benefit. You
may elect to receive the benefit in a single sum or receive
equal, monthly payments for 12 months.
o Nursing Home Option: This option is available after the
Insured has been confined to an eligible nursing home for six
months or more. When satisfactory evidence is provided,
including certification by a licensed physician, that the
Insured is expected to remain in the nursing home until death,
we will provide an accelerated payment of the portion of the
Death Benefit you select as an Accelerated Death Benefit. You
may elect to receive the benefit in a single sum or receive
equal, monthly payments for a specified number of years (not
less than two) depending upon the age of the Insured.
We can furnish you details about the amount of accelerated death
benefit available to you if you are eligible and the adjusted premium
payments that would be in effect if less than the entire death benefit
is accelerated.
You are not eligible for this benefit if you are required by law or a
government agency to: (1) exercise this option to satisfy the claims of
creditors, or (2) exercise this option in order to apply for, obtain, or retain
a government benefit or entitlement.
You should know that electing to use the Accelerated Death Benefit
could have adverse tax consequences. You should consult a tax advisor
before electing to receive this benefit.
There is no charge for this rider.
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
January 29, 1999
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. 4 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
