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 219364
Telephone (816) 753-7000 Kansas City, Missouri 64121-9364
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 definitions section at the beginning 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 the Fixed 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 MFS Investment Management(R)
MFS Research Series
MFS Total Return Series
MFS Utilities Series
MFS Global Governments Series
MFS Bond Series
American Century Variable Portfolios Manager
American Century VP Capital Appreciation American Century Investment
Management, Inc.
American Century VP Income & Growth
American Century VP International
American Century VP Value
Federated Insurance Series Manager
Federated American Leaders Fund II Federated Investment
Management Company
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 &
Mellon Equity Associates
The Dreyfus Socially Responsible Growth Fund, Inc. Manager
The Dreyfus Corporation
Sub-Investment Adviser: NCM
Capital Management Group,
Inc.
J.P. Morgan Series Trust II Manager
J.P. Morgan Equity Portfolio J.P. Morgan Investment
Management Inc.
J.P. Morgan Small Company Portfolio
Templeton Variable Products Series Fund Manager
Templeton International Fund Class 2 Templeton Investment
Counsel, Inc.
Calamos Advisors Trust Manager
Calamos Convertible Portfolio Calamos Asset Management,
Inc.
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 no-fee 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 May 1, 1999
<PAGE>
PROSPECTUS CONTENTS
DEFINITIONS.................................................................
SUMMARY AND DIAGRAM OF THE CONTRACT.........................................
DIAGRAM OF THE CONTRACT.....................................................
GENERAL INFORMATION ABOUT KANSAS CITY LIFE..................................
Kansas City Life Insurance Company.................................
THE VARIABLE ACCOUNT AND THE FUNDS..........................................
Kansas City Life Variable Life Separate Account....................
The Funds..........................................................
Resolving Material Conflicts.......................................
Addition, Deletion or Substitution of Investments..................
Voting Rights......................................................
PURCHASING A CONTRACT.......................................................
Applying for a Contract............................................
Free Look Right to Cancel Contract.................................
PREMIUM PAYMENTS............................................................
Premiums...........................................................
Premium Payments to Prevent Lapse..................................
ALLOCATIONS AND TRANSFERS...................................................
Premium Allocations and Crediting..................................
Transfer Privilege.................................................
Dollar Cost Averaging Plan.........................................
Portfolio Rebalancing Plan.........................................
FIXED ACCOUNT...............................................................
Minimum Guaranteed and Current Interest Rates......................
Calculation of Fixed Account Value.................................
Delay of Payment...................................................
CHARGES AND DEDUCTIONS......................................................
Premium Expense Charge.............................................
Monthly Deduction..................................................
Daily Mortality and Expense Risk Charge............................
Transfer Processing Fee............................................
Surrender Charge...................................................
Partial Surrender Fee..............................................
Fund Expenses......................................................
Reduced Charges for Eligible Groups................................
Other Tax Charge...................................................
HOW YOUR CONTRACT VALUES VARY...............................................
Bonus on Contract Value in the Variable Account....................
Determining the Contract Value.....................................
Cash Surrender Value...............................................
DEATH BENEFIT AND CHANGES IN SPECIFIED AMOUNT...............................
Amount of Death Benefit Proceeds...................................
Coverage Options...................................................
Initial Specified Amount and Coverage Option.......................
Changes in Coverage Option.........................................
Changes in Specified Amount........................................
Selecting and Changing the Beneficiary.............................
CASH BENEFITS...............................................................
Contract Loans.....................................................
Surrendering the Contract for Cash Surrender Value.................
Partial Surrenders.................................................
Maturity Benefit...................................................
Payment Options....................................................
Specialized Uses of the Contract...................................
Illustrations...............................................................
Assumptions........................................................
Charges Illustrated................................................
OTHER CONTRACT BENEFITS AND PROVISIONS......................................
Limits on Rights to Contest the Contract...........................
Changes in the Contract or Benefits................................
Payment of Proceeds................................................
Reports to Contract Owners.........................................
Assignment.........................................................
Reinstatement......................................................
Supplemental and/or Rider Benefits.................................
Tax Considerations..........................................................
Introduction.......................................................
Tax Status of the Contract.........................................
Tax Treatment of Contract Benefits.................................
Our Income Taxes...................................................
Possible Tax Law Changes...........................................
OTHER INFORMATION ABOUT THE CONTRACTS AND...................................
KANSAS CITY LIFE............................................................
Sale of the Contracts..............................................
Telephone Authorizations...........................................
Kansas City Life Directors and Executive Officers..................
State Regulation...................................................
Additional Information.............................................
Experts............................................................
Litigation.........................................................
Preparing for Year 2000............................................
Company Holidays...................................................
Legal Matters......................................................
Financial Statements...............................................
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>
5
DEFINITIONS
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.
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 219364, Kansas City, Missouri 64121-9364.
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 you any
Cash Surrender Value.
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 28.
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 instructions to us. 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 initially 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. Close of business occurs at 3 p.m. Central Standard Time.
Variable Account Value 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.
<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 35.)
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 19.) 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 20.) 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 49.)
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 18.) 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 20.) 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.
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 35.) 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, 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 49, for further discussion of the tax status of a Contract
and the tax consequences.
OwnerInquiries. If you have any questions, you may write or call Kansas
City Life's Home Office at 3520 Broadway, P.O. Box 219364, Kansas City, Missouri
64121-9364, 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 18 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 18.)
o Under certain circumstances, which include taking excessive Contract loans,
you may have to make extra Premium Payments to prevent lapse. (See page
20.)
- --------------------------------------------------------------------------------
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 23.)
- --------------------------------------------------------------------------------
ALLOCATION OF PREMIUM PAYMENTS
- --------------------------------------------------------------------------------
o You direct the allocation of Premium Payments among 21 Subaccounts of the
Variable Account and/or the Fixed Account. We apply premiums to your
Contract after deducting the premium expense charge. (See page 20 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 Portfolios of the Funds.
o We credit amounts allocated to the Fixed Account at interest rates
guaranteed to equal or exceed 4%. (See page 22 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 23.)
o A $25 transfer processing fee applies for any Subaccount and/or Fixed
Account transfers occurring after the first six transfers in each Contract
Year. The first six transfers are free.
- --------------------------------------------------------------------------------
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 25.) 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 27.) 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. Expenses of the Funds are not
fixed or specified in the Contract and actual expenses may vary. 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
Emerging MFS Total MFS Global MFS
Growth Research Return Utilities Gov't Bond
Series 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) 0.75% 0.75% 0.75% 0.75% 0.75% 0.60%
Other Expenses 1/ 0.10% 0.11% 0.16% 0.26% 0.36% 0.63%
----- ----- ----- ----- ----- -----
Total Annual Series Operating Expenses 1/ 0.85% 0.86% 0.91% 1.01% 1.11% 1.23%
Expense Reimbursement2/ (0.00%) (0.00%) (0.00%) (0.00%) (0.10%) (0.21%)
------- ------ ------- ------- ------- -------
Net Expenses1/ 0.85% 0.86% 0.91% 1.01% 1.01% 1.02%
</TABLE>
<TABLE>
<CAPTION>
<PAGE>
Am Cent Am Cent VP
VP Capital Income & Am Cent VP Am Cent
Appreciation Growth International VP Value
<S> <C> <C> <C> <C>
American Century Variable Portfolios Annual Expenses (as a
percentage of average net assets)
Management Fees (Investment Advisory Fees) 1.00% 0.70% 1.50% 1.00%
Other Expenses (after any expense reimbursement) 0.00% 0.00% 0.00% 0.00%
----- ----- ----- -----
Total Fund Annual Expenses (after any expense 1.00% 0.70% 1.50% 1.00%
reimbursement)3/
</TABLE>
<TABLE>
<CAPTION>
Federated Federated Federated
American High Income Prime
Leaders Bond Money
Fund II Fund II Fund II
<S> <C> <C> <C>
Federated Insurance Series Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.74% 0.60% 0.49%
Other Expenses (after waiver)4/ 0.14% 0.18% 0.31%
Shareholder Services Fee 5/ 0.00% 0.00% 0.00%
----- ----- -----
Total Fund Annual Operating Expenses (after waiver)4/ 0.88% 0.78% 0.80%
</TABLE>
<PAGE>
<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) 0.75% 0.75%
Other Expenses 0.06% 0.02%
----- -----
Total Fund Annual Expenses 0.81% 0.77%
</TABLE>
Dreyfus Stock
Index Fund
Dreyfus Stock Index Fund Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.25%
Shareholder Services Fee 6/ 0.00%
Other Expenses 0.01%
-----
Total Fund Annual Expenses6/ 0.26%
The Dreyfus
Socially
Responsible
Growth Fund,
Inc.
The Dreyfus Socially Responsible Growth Fund, Inc.
Annual Expenses (as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.75%
Shareholder Services Fee 6/ 0.00%
Other Expenses 0.05%
-----
Total Fund Annual Expenses 6/ 0.80%
<PAGE>
<TABLE>
<CAPTION>
JP Morgan JP Morgan
Equity Small Company
Portfolio Portfolio
<S> <C> <C>
J.P. Morgan Series Trust II Annual Expenses
(as a percentage of average net assets)
Management Fees 0.40% 0.60%
Other Expenses 1.08% 2.83%
----- -----
Total Annual Series Operating Expenses 7/ 1.48% 3.43%
Expense Reimbursement7/ (0.58%) (2.28%)
------- -------
Net Expenses7/ 0.90% 1.15%
</TABLE>
<PAGE>
Templeton
International
Fund Class 2 8/
Templeton Variable Product Series Fund
Annual Expenses (as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.69%
Rule 12b-1 Fees 0.25%
Other Expenses 0.17%
-----
Total Fund Annual Operating Expenses 1.11%
Calamos
Convertible
Portfolio
Calamos Advisors Trust Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.75%
Other Expenses9/ 1.25%
-----
Total Annual Portfolio Operating Expenses 2.00%
Expense Reimbursement (1.00)%
-------
Net Expenses10/ 1.00%
- --------------------------
1/ 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. Each series may enter
into other such arrangements and directed brokerage arrangements, which
would also have the effect of reducing the series' expenses. Expenses do
not take into account these expense reductions and are therefore higher
than the actual expenses of the series.
2/ MFS has agreed to bear expenses for these series, subject to
reimbursement by the series, such that each such series' "Other
Expenses" shall not exceed the following percentages of the average
daily net assets of the series during the current fiscal year: 0.40% for
the Bond Series and 0.25% for each remaining series except for the
Emerging Growth Series and Research Series which have no such
limitation. The payments made by MFS on behalf of each series under this
arrangement are subject to reimbursement by the series to MFS which will
be accomplished by the payment of an expense reimbursement fee by the
series to MFS computed and paid monthly at a percentage of the series'
average daily net assets for its then current fiscal year with a
limitation that immediately after such payment the series "Other
Expenses" will not exceed the percentage set forth above for that
series. The obligation of MFS to bear a series' "Other Expenses"
pursuant to this arrangement and the series' obligation to pay the
reimbursement fee to MFS terminates on the earlier of the date on which
payments made by the series equal the prior payment of such reimbursable
expenses by MFS or December 31, 2004 (May 1, 2001) in the case of the
New Discovery Series and May 1, 2002 in the case of the Growth Series.
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 the services provided to the American
Century VP Capital Appreciation Fund, the manager receives an annual fee
of 1.00% of the first $500 million of the average net assets of the
fund, 0.95% of the next $500 million and 0.90% thereafter. For the
services provided to the American Century VP International Fund, the
manager receives an annual fee of 1.50% of the first $250 million of the
average net assets of the fund, 1.20% of the next $250 million and 1.10%
thereafter. For the services provided to the American Century VP Value
Fund, the manager receives an annual fee of 1.00% of the first $500
million of the average net assets of the fund, 0.95% of the next $500
million and 0.90% thereafter.
<PAGE>
4/ The adviser can terminate this voluntary waiver at any time at its sole
discretion. Without this waiver, the Management Fees would have been
.75%, .60% and .50% of the average net assets of Federated American
Leaders Fund II, Federated High Income Bond Fund II and the Federated
Prime Money Fund II, respectively, and the Total Fund Annual Expenses
for these Portfolios would have been .89%, .78%, and .81%, respectively,
of average net assets.
5/ The Fund did not pay or accrue the shareholder services fee during the
fiscal year ended December 31, 1998. The Fund has no present intention
of paying or accruing the shareholder services fee during the fiscal
year ended December 31, 1999. The maximum shareholder services fee is
0.25%.
6/ The Dreyfus Socially Responsible Growth Fund, Inc. and Dreyfus Stock
Index Fund are subject to a shareholder services fee of up to 0.25% for
shareholder account service and maintenance.
7/ The trust, on behalf of each portfolio, has an Administrative Services
Agreement (the "Services Agreement") with Morgan Guaranty Trust Company
of New York ("Morgan Guaranty"), under which Morgan Guaranty is
responsible for certain aspects of the administration and operation of
each portfolio. Under the Service Agreement, each portfolio has agreed
to pay Morgan Guaranty a fee based on the percentages described below.
If total expenses of each portfolio, excluding the advisory fees, exceed
the expense limits of: 0.50% of the average daily net assets of J.P.
Morgan Equity Portfolio and 0.55% of the average daily net assets of
J.P. Morgan Small Company Portfolio, Morgan Guaranty will reimburse each
portfolio for the excess expense amount and receive no fee. Should such
expenses be less than the expense limits, Morgan Guaranty's fees would
be limited to the difference between such expenses and the fees
calculated under the Services Agreement. For the fiscal year ended
December 31, 1998, Morgan Guaranty has agreed to reimburse the
portfolios for expenses under this agreement as follows: $72,953 and
$130,582 respectively.
8/ Class 2 of the Fund has a "Rule 12b-1 plan" which is described in the
Fund's prospectus.
9/ "Other Expenses" are based on estimated amounts for
the current fiscal year.
10/ The annual expenses are estimated for the current fiscal year for the
Calamos Convertible Portfolio because the Portfolio does not have financial
statements covering a period of at least ten months. The investment manager
has voluntarily undertaken to waive fees and/or reimburse portfolio
expenses so that the Total Annual Portfolio Operating Expenses are limited
to 1.00% of the portfolio's average net assets. The investment manager may
terminate the expense limitation at any time.
<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 28.)
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 28.)
o It can be transferred among the Subaccounts and Fixed Account. We apply a
transfer fee of $25.00 if you make more than six transfers in a Contract
Year. (See page 25 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 32 for rules and limits.)
o Partial surrenders generally are available provided you have enough
remaining Cash Surrender Value. A partial surrender fee applies which is
the lesser of 2% of the amount surrendered or $25. We will assess a
surrender charge for any resulting reduction in the Specified Amount. See
page 33 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 33.) Surrenders may be subject to adverse tax
consequences.
o Under some circumstances the amount of the surrender charge during the
first few Contract Years could result in a Cash Surrender Value of zero.
o Payment options are available. (See page 34.)
<PAGE>
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DEATH BENEFITS
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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. (See
page 17.)
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 30.)
o There is flexibility to change the Coverage Option and Specified Amount.
(See page 30 for rules and limits.)
o There are supplemental and/or rider benefits that may be available. (See
page 47.)
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 use Variable Account assets (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 adviser 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.
All of the Funds may not be available in California. See your registered
representative for specifics.
MFS(R) Variable Insurance TrustSM
(Manager: MFS Investment Management(R))
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 65% 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 seeks 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 seeks to provide
above-average income (compared to a portfolio entirely invested in equity
securities) consistent with the prudent employment of capital, and secondarily
to provide a reasonable opportunity for growth of capital and income.
MFS Utilities Series. The Utilities Series seeks 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 Global Governments Series. The Global Governments Series seeks income
and capital appreciation. 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 seeks primarily to provide as high a level
of current income as is believed consistent with prudent investment risk and
secondarily 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 Income & Growth. American Century VP Income & Growth
seeks dividend growth, current income and capital appreciation. The fund will
seek to achieve its investment objective by investing in common stocks.
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 an
internationally diversified portfolio of common stocks that are considered by
management to have prospects for appreciation.
American Century VP Value. American Century VP Value seeks long-term
capital growth. Income is a secondary objective. The fund will seek to achieve
its investment objective by investing in securities that management believes to
be undervalued at the time of purchase.
<PAGE>
Federated Insurance Series
(Manager: Federated Investment Management Company)
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 and Mellon Equity Associates)
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.
The Dreyfus Socially Responsible Growth Fund, Inc.
(Manager: The Dreyfus Corporation; Sub-Investment Adviser: NCM Capital
Management Group, Inc.)
The fund seeks to provide capital growth by investing primarily in the common
stock of companies that, in the opinion of the fund's management, meet
traditional investment standards and conduct their business in a manner that
contributes to the enhancement of the quality of life in America. Current income
is a secondary goal.
J.P. Morgan Series Trust II
(Manager: J.P. Morgan Investment Management Inc.)
J.P. Morgan Equity Portfolio. The investment objective of J.P. Morgan
Equity Portfolio is to provide a high total return from a portfolio comprised of
selected equity securities. Total return will consist of realized and unrealized
capital gains and losses plus income less expenses. The Portfolio invests
primarily in the common stock of large- and medium-capitalization U.S. companies
typically represented by the Standard & Poor's 500 Stock Index.
J.P. Morgan Small Company Portfolio. The investment objective of J.P.
Morgan Small Company Portfolio is to provide a high total return from a
portfolio of equity securities of small companies. Total return will consist of
realized and unrealized capital gains and losses plus income less expenses. The
Portfolio invests at least 65% of the value of its total assets in the common
stock of small U.S. companies primarily with market capitalizations greater than
$110 million and less than $1.5 billion.
Templeton Variable Products Series Fund
(Manager: Templeton Investment Counsel, Inc.)
Templeton International Fund Class 2. The investment objective of Templeton
International Fund is long-term capital growth. The Fund seeks to achieve this
objective by investing in stocks of companies located outside the United States,
including emerging markets.
Calamos Advisors Trust
(Manager: Calamos Asset Management, Inc.)
Calamos Convertible Portfolio. Calamos Convertible Portfolio seeks current
income as its primary objective with capital appreciation as its secondary
objective. The Portfolio invests primarily in a diversified portfolio of
convertible securities. These convertible securities may be either debt
securities (bonds) or preferred stock that are convertible into common stock,
and may be issued by both U.S. and foreign companies. The Portfolio may invest
without limit in high yield or "junk" bonds. The risks of investing in junk
bonds are described in the prospectus for Calamos Advisors Trust, which you
should read carefully before investing.
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 or with a Fund and its underwriter pursuant to
which they pay us a fee. This fee is based upon an annual percentage of the
average aggregate net amount or the value of assets we invest on behalf of the
Variable Account and any other of our separate accounts. These percentages
differ. Some investment advisers, distributors, underwriters or Funds pay us a
greater percentage than others. These fees are charged to provide compensation
to us for the 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 may 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;
o approve or disapprove an investment advisory agreement; or
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 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 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 seven
days. However, if the Contract Date is calculated to be the 29th, 30th or 31st
of the month, then the Contract Date will be set to 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 first of the month after the Contract is
approved or the date we receive the initial premium. However, if approval
occurs on or between the first and the fifth 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 first 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 first of the month of
approval.
The Contract Date is determined by these guidelines except you 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. 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. (This means that the
amount we refund will not reflect either gains or losses resulting from
Subaccount performance.) If you cancel an increase in the Specified Amount, we
will return any charges attributable to the increase to your Contract Value.
PREMIUM PAYMENTS
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 23.)
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 Premium Payments," 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 49.)
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 our
interpretation of the relevant tax rules, your Contract is in jeopardy of
becoming a modified endowment contract. (See "Tax Considerations," page 49.)
We reserve the right to require satisfactory evidence of insurability prior to
accepting unscheduled premiums. (See "Premium Allocations and Crediting," page
20.)
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 33.)
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 20, 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. During the
Guaranteed Payment Period we guarantee that your Contract will not lapse if your
Premium Payments are in line with the Guaranteed Monthly Premium requirement.
For this guarantee to apply the total premiums paid must be at least equal to
the sum of:
o the amount of accumulated Guaranteed Monthly Premiums in effect; and
o additional premium amounts to cover the total amount of any partial
surrenders or Contract Loans you have made.
The Guaranteed Payment Period applies for five years after the Contract Date and
five years after the effective date of an increase in the Specified Amount. The
Contract shows the Guaranteed Monthly Premium.
The factors we use to determine the Guaranteed Monthly Premium vary by risk
class, issue Age, and sex. In calculating the Guaranteed Monthly Premium, we
include additional amounts for substandard ratings and supplemental and/or rider
benefits. If you make a change to your Contract, we will:
o recalculate the Guaranteed Monthly Premium;
o notify you of the new Guaranteed Monthly Premium; and
o 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 Premium Payments. (See "Changes in Specified Amount," page
30.)
Premium Payments to Prevent Lapse
Your Contract will lapse if there is insufficient value remaining in the
Contract at the end of the Grace Period. Since 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 will also vary.
On each Monthly Anniversary Day we will check your Contract to determine if
there is enough value to prevent lapse. If your Contract does lapse you must pay
the required amount before the end of the Grace Period. The conditions to
prevent lapse will depend on whether a Guaranteed Payment Period is in effect as
follows:
After the Guaranteed Payment Period. The Contract lapses and a Grace Period
starts if the Cash Surrender Value is not enough to cover the Monthly Deduction.
To prevent the Contract from terminating you must pay enough premium to increase
the Cash Surrender Value to at least the amount of three Monthly Deductions. You
must make this payment before the end of the Grace Period.
During the Guaranteed Payment Period. The Contract lapses and 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 required to guarantee lapse won't occur
during the Guaranteed Payment Period. (See "Guaranteed Payment Period and
Guaranteed Monthly Premium," page 19.)
If lapse occurs, the premium you must pay to keep the Contract in force will be
equal to the lesser of:
o the amount to guarantee the Contract won't lapse during the Guaranteed
Payment Period less the accumulated premiums you have paid; and
o enough premium to increase the Cash Surrender Value to at least the amount
of three Monthly Deductions.
Grace Period. The purpose of the Grace Period is to give you the chance to
pay enough premiums to keep your Contract in force. We will send you notice of
the amount required to be paid. The Grace Period is 61 days and starts when we
send the notice. Your Contract remains in force during the Grace Period. If the
Insured dies during the Grace Period, we will pay the Death Benefit Proceeds,
but we will deduct any Monthly Deductions due. (See "Amount of Death Benefit
Proceeds," page 29.) If you don't pay adequate premiums before the Grace Period
ends, your Contract will terminate. (See "Reinstatement," page 46.)
ALLOCATIONS AND TRANSFERS
Premium Allocations and Crediting
In the Contract application, you select how we will allocate premiums (less
premium expense charges) among the Subaccounts and the Fixed Account. The sum of
your allocations must equal 100%. We may 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 may change the allocation percentages at
any time by sending Written Notice. You may make changes in your allocation by
telephone if you have provided proper authorization. (See "Telephone
Authorizations," page 52.) 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 28.)
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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);
o we may, where permitted, suspend or modify this transfer privilege at any
time with notice to you.
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 Authorizations," page 52. )
Additional No-Fee Transfer Right. This additional, one-time transfer
feature allows you to transfer all or a portion of the Variable Account Value to
the Fixed Account and we will make this transfer without applying the transfer
processing fee (even if you have already used the six free transfers for that
Contract Year.) This additional no-fee transfer right applies during the first
24 months of the Contract or within the 24 months following the effective date
of an increase to the Specified Amount.
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 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 instead of allocating
the total amount all at one time. We can 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. You may
allocate the required amounts 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. Restrictions apply to transfers from the Fixed Account.
You may elect this plan at the time of application by completing the
authorization. You may also elect it at any time after the Contract is issued by
completing the election form. You may make changes in dollar cost averaging by
telephone if you have provided proper authorization.
Dollar cost averaging transfers will start on the next Monthly Anniversary Day
on or following the Reallocation Date or the date you request. Once elected, we
will process transfers from the Federated Prime Money Fund II monthly until:
o we have completed the designated number of transfers;
o the value of the Federated Prime Money Fund II Subaccount is completely
depleted; or
o you send Written Notice instructing us to cancel the monthly transfers.
Transfers made under the Dollar Cost Averaging Plan will not count toward the
six free transfers allowed each Contract Year. We may 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. Under this plan we will redistribute the accumulated balance of each
Subaccount to equal a specified percentage of the Variable Account Value. We
will do this on a quarterly basis at three-month intervals from the Monthly
Anniversary Day on which portfolio rebalancing begins.
The purpose of the Portfolio Rebalancing Plan is to automatically diversify your
portfolio mix. This plan automatically adjusts your Portfolio mix to be
consistent with your current allocation instructions. If you make a change to
your premium allocation, we will also automatically change the allocation used
for portfolio rebalancing to be consistent with the new premium allocation
unless you instruct us otherwise.
The redistribution occurring under this plan 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
ends.
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. You may make changes in portfolio
rebalancing by telephone if you have provided proper authorization. Portfolio
rebalancing will terminate when: o you request any transfer unless you authorize
a change in allocation at that time; or o the day we receive Written Notice
instructing us to cancel the plan.
If the Contract Value is negative at the time portfolio rebalancing is
scheduled, we will not complete the redistribution. We may cancel the Portfolio
Rebalancing Plan 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 Transfer Privilege, page
21.) 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 the 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 to 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 may 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 has occurred prior to
the Allocation Date. (See "Applying for Contract," page 17.) The Monthly
Deduction consists of :
(1) cost of insurance charges;
(2) monthly expense charges; 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.
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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.
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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 advisers 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 17.) 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 47.)
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. We
may make a profit from this charge. Any profit may be used to finance
distribution expenses.
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 for 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.
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.
Under some circumstances the amount of the surrender charge during the first few
Contract Years could result in a Cash Surrender Value of zero. This will depend
upon a number of factors, but is more likely if:
o premiums paid are equal to or only a little higher than the Guaranteed
Monthly Premium shown in your Contract; or
o if investment performance of the Subaccounts is too low.
See Appendix A for a chart that shows the Maximum Surrender Charge Factors,
depending upon the Insured's Age, sex and underwriting classification.
Deferred Sales Load. The purpose of the deferred sales load is to reimburse
us for some of the expenses we incur 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.
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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.
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 20) and the
Guaranteed Payment Period is not then in effect, the Contract will be in default
and a Grace Period will begin. (See "Guaranteed Payment Period and Guaranteed
Monthly Premium," page 19, and "Grace Period," page 20.)
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 premium expense charge and the Monthly Deductions. 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 selected Subaccounts;
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 20 and "Surrendering the Contract for Cash Surrender Value," page 33.)
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 46) or, if you prefer, under a payment
option (See "Payment Options," page 34). We will pay the Death Benefit Proceeds
to the Beneficiary. (See "Selecting and Changing the Beneficiary," page 32.)
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.
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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 45.)
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 37.
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 49.)
Changes in Specified Amount
You may increase or decrease the Specified Amount. We may require that the
Contract be in force for one Contract Year before a change in Specified Amount
and that you make only one change every twelve Contract Months. If a change in
the Specified Amount results in total premiums paid exceeding the premium
limitations set out 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
limitations. We will make such a refund after the next Monthly Anniversary.
Decreases. We require that the Specified Amount after any decrease must be
at least $100,000 for Contracts that were issued at Ages 0-49 and $50,000 for
Contracts that were issued at Ages 50-80. A decrease in Specified Amount will be
effective on the Monthly Anniversary Day on or following the day we receive your
Written Notice.
Decreasing the Specified Amount may decrease monthly cost of insurance charges.
However, a surrender charge will apply if the Specified Amount is decreased (See
"Surrender Charge," page 26.)
We reserve the right to decline a requested decrease in the Specified Amount in
the following circumstances:
o to help ensure compliance with the guideline premium limitations;
o if compliance with the guideline premium limitations under current tax law
resulting from this decrease would result in immediate termination of the
Contract;
o 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.
A decrease in the Specified Amount may have tax consequences. (See "Tax
Considerations," page 49.)
Increases. In order to be eligible for an increase you must submit an
application. We may require satisfactory evidence of insurability. We may
decline 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.) In addition, the Insured's Age must be
less than the current maximum issue Age for the Contracts. The increase in
Specified Amount is effective on the Monthly Anniversary Day on or after the
date we receive and approve the request for the increase.
An increase has the following affect on Premium Payments:
o a change in Planned Premium Payments may be advisable. (See "Premium
Payments Upon Increase in Specified Amount," page 19);
o a new Guaranteed Payment Period begins on the effective date of the
increase and will continue for five years (see "Guaranteed Payment Period
and Guaranteed Monthly Premium," page 19); and
o if a Guaranteed Payment Period is in effect, we will recalculate the
Contract's Guaranteed Monthly Premium to reflect the increase. (See
"Guaranteed Payment Period and Guaranteed Monthly Premium," page 19.)
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 26). 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 "coverage premium weighting factor" for the
initial Specified Amount and each increase bears to the total "coverage premium
weighting factor" for the Contract.
The "coverage premium weighting factor" is a hypothetical, level amount that
would be payable through the Maturity Date for the benefits provided under the
Contract. We calculate this amount using the following assumptions:
o cost of insurance rates based on the 1980 Commissioners Standard Ordinary
Mortality Tables;
o net investment earnings under the Contract;
o an effective annual rate of 5%; and
o sales and other charges imposed under 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.
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 18.)
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 from your Contract while the Insured is living by submitting a
written request to us. You may also make loans by telephone if you have provided
proper authorization to us. (See "Telephone Authorizations," page 52.) 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 request is received and
approved. We will send Loan Proceeds to you, usually within seven calendar days.
(See "Payment of Proceeds," page 46.)
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.
<PAGE>
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 49, 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 29.)
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 avoid termination. The notice will specify the amount that
must be repaid to prevent termination. (See "Premium Payments to Prevent Lapse,"
page 20.)
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. A surrender charge may apply. (See "Surrender
Charge," page 26.) 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 46.) You may receive the Cash Surrender Value
in one lump sum or you may apply it to a payment option. (See "Payment Options,"
page 34.) 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 49.)
(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 27.) 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 23.) Partial
surrenders may have adverse tax consequences. (See "Tax Considerations," page
49.)
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 30.
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 46.)
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. One form of minimum guaranteed
payment period 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 49.)
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 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 21 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; and
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 0.91% 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. This
average annual expense ratio takes into account expense reimbursement
arrangements to be in place for 1999 for some of the Portfolios. In the absence
of the reimbursement arrangements for some of the Portfolios the average annual
expense ratio would be assumed to equal 1.11% of the average daily net assets of
the Portfolios available under the Contracts. If the reimbursement arrangements
were discontinued, the values in the illustrations could be less. 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 -1.80%, 4.15% and
10.09%, respectively.
The illustrations also reflect the deduction of the Premium Expense Charge and
the Monthly Deduction. The Monthly Deduction includes the cost of insurance
charge. 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 our 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.
<PAGE>
<TABLE>
<CAPTION>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION A
USING CURRENT COST OF INSURANCE RATES
BONUS PAID BEGINNING IN YEAR 11
Male, Standard Nonsmoker, Age 35
- ---------- --------------------- ----------------------------------------------- -------------------------------------
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 Year Accumulated at 5% Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Interest per Year Value Value Value
- ------------ ------------------- --------- --------- ---------- -------- --------- -------- ------- --------- --------
- ------------ ------------------- --------- --------- ---------- -------- --------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 481 0 100,000 524 0 100,000 567 0 100,000
2 2,153 1,184 265 100,000 1,307 388 100,000 1,436 517 100,000
3 3,310 1,864 464 100,000 2,113 713 100,000 2,383 983 100,000
4 4,526 2,520 820 100,000 2,940 1,240 100,000 3,413 1,713 100,000
5 5,802 3,153 1,153 100,000 3,790 1,790 100,000 4,536 2,536 100,000
6 7,142 3,759 1,797 100,000 4,661 2,699 100,000 5,759 3,797 100,000
7 8,549 4,339 2,427 100,000 5,552 3,640 100,000 7,090 5,178 100,000
8 10,027 4,892 3,030 100,000 6,465 4,603 100,000 8,541 6,679 100,000
9 11,578 5,417 3,605 100,000 7,398 5,586 100,000 10,123 8,311 100,000
10 13,207 5,913 4,403 100,000 8,352 6,842 100,000 11,848 10,338 100,000
15 22,657 8,202 8,202 100,000 13,827 13,827 100,000 23,830 23,830 100,000
20 34,719 9,682 9,682 100,000 20,088 20,088 100,000 43,345 43,345 100,000
25 50,113 9,864 9,864 100,000 26,941 26,941 100,000 75,746 75,746 100,000
30 69,761 7,862 7,862 100,000 33,982 33,982 100,000 129,365 129,365 155,237
- ------------ ------------------- --------- --------- ----------- -------- --------- -------- ------- --------- --------
You should not assume that the hypothetical investment rates of return shown
above and elsewhere in this prospectus are representative of past or future
investment rates of return. These rates are hypothetical. Actual rates of
return may be more or less than those shown. The actual rates will depend on
a number of factors including the investment allocations you make, prevailing
rates and rates of inflation. The values for a Contract will 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. Neither we, nor any Fund, can make the statement
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION A
USING GUARANTEED COST OF INSURANCE RATES
NO BONUS PAID
Male, Standard Nonsmoker, Age 35
- ---------- --------------------- ----------------------------------------------- -------------------------------------
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 Year Accumulated at 5% Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Interest per Year Value Value Value
- ------------ ------------------- --------- --------- ---------- -------- --------- -------- ------- --------- --------
- ------------ ------------------- --------- --------- ---------- -------- --------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 481 0 100,000 524 0 100,000 567 0 100,000
2 2,153 1,184 265 100,000 1,307 388 100,000 1,436 517 100,000
3 3,310 1,864 464 100,000 2,113 713 100,000 2,383 983 100,000
4 4,526 2,520 820 100,000 2,940 1,240 100,000 3,413 1,713 100,000
5 5,802 3,153 1,153 100,000 3,790 1,790 100,000 4,536 2,536 100,000
6 7,142 3,759 1,797 100,000 4,661 2,699 100,000 5,759 3,797 100,000
7 8,549 4,339 2,427 100,000 5,552 3,640 100,000 7,090 5,178 100,000
8 10,027 4,892 3,030 100,000 6,465 4,603 100,000 8,541 6,679 100,000
9 11,578 5,417 3,605 100,000 7,398 5,586 100,000 10,123 8,311 100,000
10 13,207 5,913 4,403 100,000 8,352 6,842 100,000 11,848 10,338 100,000
15 22,657 7,895 7,895 100,000 13,387 13,387 100,000 23,163 23,163 100,000
20 34,719 8,794 8,794 100,000 18,688 18,688 100,000 40,907 40,907 100,000
25 50,113 7,951 7,951 100,000 23,718 23,718 100,000 69,394 69,394 100,000
30 69,761 4,202 4,202 100,000 27,538 27,538 100,000 115,842 115,842 139,010
- ------------ ------------------- --------- --------- ----------- -------- --------- -------- ------- --------- --------
You should not assume that the hypothetical investment rates of return shown
above and elsewhere in this prospectus are representative of past or future
investment rates of return. These rates are hypothetical. Actual rates of
return may be more or less than those shown. The actual rates will depend on
a number of factors including the investment allocations you make, prevailing
rates and rates of inflation. The values for a Contract will 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. Neither we, nor any Fund, can make the statement
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION B
USING CURRENT COST OF INSURANCE RATES
BONUS PAID BEGINNING IN YEAR 11
Male, Standard Nonsmoker, Age 35
- ---------- --------------------- ----------------------------------------------- -------------------------------------
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 Year Accumulated at 5% Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Interest per Year Value Value Value
- ------------ ------------------- --------- --------- ---------- -------- --------- -------- ------- --------- --------
- ------------ ------------------- --------- --------- ---------- -------- --------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 480 0 100,480 523 0 100,523 566 0 100,566
2 2,153 1,181 81 101,181 1,303 203 101,303 1,432 332 101,432
3 3,310 1,857 457 101,857 2,104 704 102,104 2,373 973 102,373
4 4,526 2,507 807 102,507 2,925 1,225 102,925 3,395 1,695 103,395
5 5,802 3,133 1,133 103,133 3,766 1,766 103,766 4,506 2,506 104,506
6 7,142 3,730 1,768 103,730 4,624 2,662 104,624 5,711 3,749 105,711
7 8,549 4,299 2,387 104,299 5,499 3,587 105,499 7,019 5,107 107,019
8 10,027 4,839 2,977 104,839 6,392 4,530 106,392 8,439 6,577 108,439
9 11,578 5,349 3,537 105,349 7,300 5,488 107,300 9,981 8,169 109,981
10 13,207 5,826 4,316 105,826 8,222 6,712 108,222 11,653 10,143 111,653
15 22,657 7,982 7,982 107,982 13,424 13,424 113,424 23,084 23,084 123,084
20 34,719 9,231 9,231 109,231 19,065 19,065 119,065 40,985 40,985 140,985
25 50,113 9,033 9,033 109,033 24,568 24,568 124,568 68,802 68,802 168,802
30 69,761 6,491 6,491 106,491 28,756 28,756 128,756 111,713 111,713 211,713
You should not assume that the hypothetical investment rates of return shown
above and elsewhere in this prospectus are representative of past or future
investment rates of return. These rates are hypothetical. Actual rates of
return may be more or less than those shown. The actual rates will depend on
a number of factors including the investment allocations you make, prevailing
rates and rates of inflation. The values for a Contract will 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. Neither we, nor any Fund, can make the statement
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION B
USING GUARANTEED COST OF INSURANCE RATES
NO BONUS PAID
Male, Standard Nonsmoker, Age 35
- ---------- --------------------- ----------------------------------------------- -------------------------------------
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 Year Accumulated at 5% Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Interest per Year Value Value Value
- ------------ ------------------- --------- --------- ---------- -------- --------- -------- ------- --------- --------
- ------------ ------------------- --------- --------- ---------- -------- --------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 480 0 100,480 523 0 100,523 566 0 100,566
2 2,153 1,181 81 101,181 1,303 203 101,303 1,432 332 101,432
3 3,310 1,857 457 101,857 2,104 704 102,104 2,373 973 102,373
4 4,526 2,507 807 102,507 2,925 1,225 102,925 3,395 1,695 103,395
5 5,802 3,133 1,133 103,133 3,766 1,766 103,766 4,506 2,506 104,506
6 7,142 3,730 1,768 103,730 4,624 2,662 104,624 5,711 3,749 105,711
7 8,549 4,299 2,387 104,299 5,499 3,587 105,499 7,019 5,107 107,019
8 10,027 4,839 2,977 104,839 6,392 4,530 106,392 8,439 6,577 108,439
9 11,578 5,349 3,537 105,349 7,300 5,488 107,300 9,981 8,169 109,981
10 13,207 5,826 4,316 105,826 8,222 6,712 108,222 11,653 10,143 111,653
15 22,657 7,670 7,670 107,670 12,973 12,973 112,973 22,399 22,399 122,399
20 34,719 8,322 8,322 108,322 17,613 17,613 117,613 38,426 38,426 138,426
25 50,113 7,088 7,088 107,088 21,196 21,196 121,196 61,935 61,935 161,935
30 69,761 2,890 2,890 102,890 22,063 22,063 122,063 95,924 95,924 195,924
You should not assume that the hypothetical investment rates of return shown
above and elsewhere in this prospectus are representative of past or future
investment rates of return. These rates are hypothetical. Actual rates of
return may be more or less than those shown. The actual rates will depend on
a number of factors including the investment allocations you make, prevailing
rates and rates of inflation. The values for a Contract will 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. Neither we, nor any Fund, can make the statement
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION A
USING CURRENT COST OF INSURANCE RATES
BONUS PAID BEGINNING IN YEAR 11
Female, Standard Nonsmoker, Age 35
- ---------- --------------------- ----------------------------------------------- -------------------------------------
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 Year Accumulated at 5% Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Interest per Year Value Value Value
- ------------ ------------------- --------- --------- ---------- -------- --------- -------- ------- --------- --------
- ------------ ------------------- --------- --------- ---------- -------- --------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 503 0 100,000 546 0 100,000 590 0 100,000
2 2,153 1,226 337 100,000 1,352 463 100,000 1,483 595 100,000
3 3,310 1,925 525 100,000 2,180 780 100,000 2,456 1,056 100,000
4 4,526 2,601 901 100,000 3,031 1,331 100,000 3,516 1,816 100,000
5 5,802 3,252 1,456 100,000 3,906 2,110 100,000 4,670 2,874 100,000
6 7,142 3,877 2,131 100,000 4,802 3,056 100,000 5,927 4,181 100,000
7 8,549 4,474 2,778 100,000 5,720 4,024 100,000 7,297 5,601 100,000
8 10,027 5,046 3,400 100,000 6,661 5,015 100,000 8,790 7,144 100,000
9 11,578 5,592 3,996 100,000 7,627 6,031 100,000 10,422 8,826 100,000
10 13,207 6,113 4,783 100,000 8,618 7,288 100,000 12,207 10,877 100,000
15 22,657 8,706 8,706 100,000 14,511 14,511 100,000 24,796 24,796 100,000
20 34,719 10,813 10,813 100,000 21,638 21,638 100,000 45,600 45,600 100,000
25 50,113 12,299 12,299 100,000 30,243 30,243 100,000 80,367 80,367 104,478
30 69,761 12,763 12,763 100,000 40,499 40,499 100,000 137,873 137,873 165,448
You should not assume that the hypothetical investment rates of return shown
above and elsewhere in this prospectus are representative of past or future
investment rates of return. These rates are hypothetical. Actual rates of
return may be more or less than those shown. The actual rates will depend on
a number of factors including the investment allocations you make, prevailing
rates and rates of inflation. The values for a Contract will 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. Neither we, nor any Fund, can make the statement
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION A
USING GUARANTEED COST OF INSURANCE RATES
NO BONUS PAID
Female, Standard Nonsmoker, Age 35
- ---------- --------------------- ----------------------------------------------- -------------------------------------
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 Year Accumulated at 5% Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Interest per Year Value Value Value
- ------------ ------------------- --------- --------- ---------- -------- --------- -------- ------- --------- --------
- ------------ ------------------- --------- --------- ---------- -------- --------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 503 0 100,000 546 0 100,000 590 0 100,000
2 2,153 1,226 337 100,000 1,352 463 100,000 1,483 595 100,000
3 3,310 1,925 525 100,000 2,180 780 100,000 2,456 1,056 100,000
4 4,526 2,601 901 100,000 3,031 1,331 100,000 3,516 1,816 100,000
5 5,802 3,252 1,456 100,000 3,906 2,110 100,000 4,670 2,874 100,000
6 7,142 3,877 2,131 100,000 4,802 3,056 100,000 5,927 4,181 100,000
7 8,549 4,474 2,778 100,000 5,720 4,024 100,000 7,297 5,601 100,000
8 10,027 5,046 3,400 100,000 6,661 5,015 100,000 8,790 7,144 100,000
9 11,578 5,592 3,996 100,000 7,627 6,031 100,000 10,422 8,826 100,000
10 13,207 6,113 4,783 100,000 8,618 7,288 100,000 12,207 10,877 100,000
15 22,657 8,309 8,309 100,000 13,969 13,969 100,000 24,017 24,017 100,000
20 34,719 9,681 9,681 100,000 19,939 19,939 100,000 42,808 42,808 100,000
25 50,113 10,016 10,016 100,000 26,506 26,506 100,000 73,363 73,363 100,000
30 69,761 8,844 8,844 100,000 33,543 33,543 100,000 123,101 123,101 147,721
You should not assume that the hypothetical investment rates of return shown
above and elsewhere in this prospectus are representative of past or future
investment rates of return. These rates are hypothetical. Actual rates of
return may be more or less than those shown. The actual rates will depend on
a number of factors including the investment allocations you make, prevailing
rates and rates of inflation. The values for a Contract will 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. Neither we, nor any Fund, can make the statement
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION B
USING CURRENT COST OF INSURANCE RATES
BONUS PAID BEGINNING IN YEAR 11
Female, Standard Nonsmoker, Age 35
- ---------- --------------------- ----------------------------------------------- -------------------------------------
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 Year Accumulated at 5% Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Interest per Year Value Value Value
- ------------ ------------------- --------- --------- ---------- -------- --------- -------- ------- --------- --------
- ------------ ------------------- --------- --------- ---------- -------- --------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 502 0 100,502 545 0 100,545 589 0 100,589
2 2,153 1,223 137 101,223 1,348 263 101,348 1,479 394 101,479
3 3,310 1,919 519 101,919 2,172 772 102,172 2,447 1,047 102,447
4 4,526 2,589 889 102,589 3,017 1,317 103,017 3,499 1,799 103,499
5 5,802 3,234 1,438 103,234 3,883 2,087 103,883 4,643 2,847 104,643
6 7,142 3,850 2,104 103,850 4,768 3,022 104,768 5,884 4,138 105,884
7 8,549 4,438 2,742 104,438 5,670 3,974 105,670 7,231 5,535 107,231
8 10,027 4,997 3,351 104,997 6,592 4,946 106,592 8,696 7,050 108,696
9 11,578 5,528 3,932 105,528 7,534 5,938 107,534 10,289 8,693 110,289
10 13,207 6,032 4,702 106,032 8,497 7,167 108,497 12,025 10,695 112,025
15 22,657 8,513 8,513 108,513 14,155 14,155 114,155 24,140 24,140 124,140
20 34,719 10,440 10,440 110,440 20,797 20,797 120,797 43,663 43,663 143,663
25 50,113 11,653 11,653 111,653 28,444 28,444 128,444 75,184 75,184 175,184
30 69,761 11,694 11,694 111,694 36,782 36,782 136,782 125,905 125,905 225,905
You should not assume that the hypothetical investment rates of return shown
above and elsewhere in this prospectus are representative of past or future
investment rates of return. These rates are hypothetical. Actual rates of
return may be more or less than those shown. The actual rates will depend on
a number of factors including the investment allocations you make, prevailing
rates and rates of inflation. The values for a Contract will 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. Neither we, nor any Fund, can make the statement
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION B
USING GUARANTEED COST OF INSURANCE RATES
NO BONUS PAID
Female, Standard Nonsmoker, Age 35
- ---------- --------------------- ----------------------------------------------- -------------------------------------
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 Year Accumulated at 5% Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Interest per Year Value Value Value
- ------------ ------------------- --------- --------- ---------- -------- --------- -------- ------- --------- --------
- ------------ ------------------- --------- --------- ---------- -------- --------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 502 0 100,502 545 0 100,545 589 0 100,589
2 2,153 1,223 137 101,223 1,348 263 101,348 1,479 394 101,479
3 3,310 1,919 519 101,919 2,172 772 102,172 2,447 1,047 102,447
4 4,526 2,589 889 102,589 3,017 1,317 103,017 3,499 1,799 103,499
5 5,802 3,234 1,438 103,234 3,883 2,087 103,883 4,643 2,847 104,643
6 7,142 3,850 2,104 103,850 4,768 3,022 104,768 5,884 4,138 105,884
7 8,549 4,438 2,742 104,438 5,670 3,974 105,670 7,231 5,535 107,231
8 10,027 4,997 3,351 104,997 6,592 4,946 106,592 8,696 7,050 108,696
9 11,578 5,528 3,932 105,528 7,534 5,938 107,534 10,289 8,693 110,289
10 13,207 6,032 4,702 106,032 8,497 7,167 108,497 12,025 10,695 112,025
15 22,657 8,103 8,103 108,103 13,590 13,590 113,590 23,319 23,319 123,319
20 34,719 9,258 9,258 109,258 18,985 18,985 118,985 40,617 40,617 140,617
25 50,113 9,268 9,268 109,268 24,386 24,386 124,386 67,194 67,194 167,194
30 69,761 7,648 7,648 107,648 29,146 29,146 129,146 108,066 108,066 208,066
You should not assume that the hypothetical investment rates of return shown
above and elsewhere in this prospectus are representative of past or future
investment rates of return. These rates are hypothetical. Actual rates of
return may be more or less than those shown. The actual rates will depend on
a number of factors including the investment allocations you make, prevailing
rates and rates of inflation. The values for a Contract will 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. Neither we, nor any Fund, can make the statement
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
</TABLE>
<PAGE>
- 56 -
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 usually pay Proceeds within seven calendar days after we receive all the
documents required for such a payment.
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 a payment or a transfer
request 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. As described below, we will pay Death Benefit
Proceeds through Kansas City Life's Personal Growth Account. We place Proceeds
to be paid through the Personal Growth Account in our general account. The
Personal Growth Account pays interest and provides check-writing privileges
under which we reimburse the bank that pays the check out of the Proceeds held
in our general account. 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.
The Personal Growth Account is not a bank account and is not insured, nor
guaranteed, by the FDIC or any other government agency.
We will pay Death Benefit Proceeds through the Personal Growth Account when:
o the Proceeds are paid to an individual; and
o the amount of Proceeds is $5,000 or more.
Any other use of the Personal Growth Account requires our approval.
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.
<PAGE>
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.
<PAGE>
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 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 adviser 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 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.
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.
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 adviser 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.
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 have the right to do so.
Currently, the Contracts will be offered in all states except New Jersey, New
York and Vermont. 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 219365, Kansas City, Missouri 64121-9364.
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 Authorizations
You may request the following transactions by telephone if you made the election
at the time of application or provided proper authorization to us:
o transfer of Contract Value;
o change in premium allocation;
o change in dollar cost averaging;
o change in portfolio rebalancing; or
o Contract loan
We may suspend these telephone privileges at any time if we decide that such
suspension is 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.
DarylD. 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.
LarryWinn 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
64111-2565.
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 the years ended December 31, 1998, 1997 and 1996;
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 1997.
The Independent Auditor's reports 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.
Company Holidays
We are closed on the following holidays: New Year's Day, President's Day,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Additional holidays in 1999 will be October 11, November 26, December 24 and
December 31. We will recognize holidays that fall on a Saturday on the previous
Friday. We will recognize holidays that fall on a Sunday on the following
Monday.
On these holidays, there will be no valuation.
Legal Matters
Sutherland, Asbill & Brennan LLP 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 1997.
<PAGE>
Appendix A
Maximum Surrender Charge Factors
(Per$1,000)
Male Female Male Female
Issue Age SM NS SM NS Issue Age SM NS SM NS
0 24.48 23.76 40 82.80 62.64 63.36 54.00
1 24.48 23.76 41 87.12 66.24 66.24 56.16
2 24.48 23.76 42 90.72 69.12 69.12 59.04
3 24.48 23.76 43 95.76 72.72 72.00 61.20
4 24.48 23.76 44 100.08 75.60 75.60 64.08
5 24.48 23.76 45 105.12 79.92 79.20 66.96
6 25.20 23.76 46 110.16 83.52 82.08 70.56
7 25.20 23.76 47 115.92 87.84 86.40 73.44
8 25.92 24.48 48 121.68 92.16 90.00 77.04
9 25.92 24.48 49 128.16 97.20 94.32 80.64
10 26.64 24.48 50 134.64 102.24 98.64 84.96
11 28.08 25.20 51 141.12 107.28 102.96 88.56
12 28.80 25.20 52 148.32 113.04 108.00 92.88
13 30.24 25.92 53 156.24 118.80 113.04 97.92
14 30.96 25.92 54 164.88 125.28 118.80 102.96
15 36.72 32.40 29.52 26.64 55 173.52 132.48 123.84 108.00
16 37.44 32.40 30.24 26.64 56 182.16 139.68 130.32 113.04
17 37.44 32.40 30.24 27.36 57 191.52 146.88 136.80 119.52
18 38.16 33.12 30.96 27.36 58 202.32 155.52 143.28 125.28
19 38.16 33.12 30.96 28.08 59 213.12 164.16 150.48 132.48
20 38.88 33.12 31.68 28.08 60 224.64 173.52 158.40 139.68
21 39.60 33.12 32.40 28.08 61 236.88 183.60 167.04 147.60
22 40.32 33.12 32.40 28.08 62 249.84 194.40 176.40 155.52
23 41.04 33.12 33.12 28.80 63 263.52 205.92 185.76 164.88
24 41.76 33.12 33.12 28.80 64 277.92 218.16 196.56 174.24
25 42.48 33.12 33.84 28.80 65 293.04 231.12 207.36 184.32
26 44.64 34.56 35.28 30.24 66 308.88 245.52 218.88 195.84
27 46.08 36.00 36.72 30.96 67 326.16 260.64 231.84 207.36
28 48.24 37.44 38.16 32.40 68 344.16 276.48 244.80 220.32
29 50.40 38.88 39.60 33.84 69 363.60 293.76 259.92 234.72
30 52.56 40.32 41.04 35.28 70 383.76 312.48 275.76 249.84
31 54.72 42.48 43.20 36.72 71 405.36 332.64 293.04 266.40
32 57.60 43.92 44.64 38.16 72 429.12 354.24 312.48 284.40
33 59.76 46.08 46.80 39.60 73 452.88 376.56 332.64 303.84
34 62.64 48.24 48.96 41.76 74 478.80 401.04 354.96 325.44
35 65.52 50.40 51.12 43.20 75 505.44 426.96 378.72 348.48
36 68.40 52.56 53.28 45.36 76 532.80 454.32 403.20 372.96
37 72.00 54.72 55.44 47.52 77 561.60 483.12 430.56 399.60
38 75.60 57.60 58.32 49.68 78 591.84 514.80 459.36 429.12
39 79.20 60.48 60.48 51.84 79 624.24 547.92 491.04 460.80
80 658.80 584.64 525.60 495.36
- --------------------------------------------------------------------------------
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 2 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 prior Monthly
Anniversary Date; and (2) an amount equal to the sum of any partial surrenders
taken and Indebtedness under the Contract.
The No-Lapse Payment 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.
<PAGE>
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 the amount of the Monthly Deduction
and the accumulated premiums paid as of the Monthly Anniversary Date
are less than required to guarantee the Contract will not lapse during
the No-Lapse Payment Period.
After the No-Lapse Period A Grace Period starts if the Cash Surrender
Value on a Monthly Anniversary Day will not cover the Monthly
Deduction. 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 in 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 will continue 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 "Additional No-Fee Transfer Right" shown on page 21 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 the Funds. Once within the first 24
Contract 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
- --------------------------------------------------------------------------------
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 "Additional No-Fee 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 the 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
