As filed with the Securities and Exchange Commission on October 31, 2000.
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
Kansas City Life Variable Life Separate Account
(Exact name of trust)
KANSAS CITY LIFE INSURANCE COMPANY
(Name of depositor)
3520 Broadway
Kansas City, Missouri 64141-6139
(Complete address of depositor's principal executive offices)
C. John Malacarne
Kansas City Life Insurance Company
3520 Broadway
Kansas City, Missouri 64141-6139
(Name and complete address of agent for service)
Copy to:
Stephen E. Roth, Esq.
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2415
Approximate date of proposed public offering:
As soon as practicable after the effective date of this Registration Statement.
Securities Being Offered-Flexible Premium Variable Life Insurance Contracts.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8 (a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such dates as the Commission, acting pursuant to said Section 8(a),
may determine.
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 ("Kansas
City Life"). 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:
<TABLE>
<S> <C>
MFS Variable Insurance TrustSM Manager
MFS Emerging Growth Series MFS Investment Management
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 Investment Management Company
Federated Prime Money Fund II Federated Investment Management Company
Federated International Small Company Fund II Federated Global Investment Management Corporation
Dreyfus Variable Investment Fund Manager
Appreciation Portfolio The Dreyfus Corporation
Small Cap Portfolio Sub-Investment Adviser for Appreciation Portfolio:
Fayez Sarofim & Co.
Dreyfus Stock Index Fund Manager
The Dreyfus Corporation
Index Fund Manager: 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 U.S. Disciplined Equity Portfolio J.P. Morgan Investment Management Inc.
J.P. Morgan Small Company Portfolio
Franklin Templeton Variable Insurance Products Trust Manager
Templeton International Securities Fund (Class 2) Templeton Investment Counsel, Inc.
Franklin Small Cap Fund (Class 2) Franklin Advisers, Inc.
Franklin Real Estate Fund (Class 2) Franklin Advisers, Inc.
Templeton Developing Markets Securities Fund (Class 2) Templeton Asset Management Ltd.
Calamos Advisors Trust Manager
Calamos Convertible Portfolio Calamos Asset Management, Inc.
AIM Variable Insurance Funds Manager
AIM V. I. Dent Demographic Trends Fund A I M Advisors, Inc.
AIM V. I. Telecommunications and Technology Fund
AIM V. I. Value Fund
Seligman Portfolios, Inc. Manager
Seligman Capital Portfolio (Class 2) J. & W. Seligman & Co. Incorporated
Seligman Communications and Information Portfolio (Class 2)
</TABLE>
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
Premiums 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;
o Option B: a Death Benefit that fluctuates with the value of the Contract;
and
o Option C: a Death Benefit that increases the more Premiums you pay and the
less you withdraw.
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 and there may be no cash
surrender value on early surrenders. 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 Premiums (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 XXXXX.
PROSPECTUS CONTENTS
DEFINITIONS....................................................................1
SUMMARY AND DIAGRAM OF THE CONTRACT............................................3
DIAGRAM OF THE CONTRACT........................................................4
GENERAL INFORMATION ABOUT KANSAS CITY LIFE....................................12
Kansas City Life Insurance Company...................................12
THE VARIABLE ACCOUNT AND THE FUNDS............................................12
Kansas City Life Variable Life Separate Account......................12
The Funds............................................................12
Resolving Material Conflicts.........................................16
Addition, Deletion or Substitution of Investments....................16
Voting Rights........................................................16
PURCHASING A CONTRACT.........................................................17
Applying for a Contract..............................................17
Determination of Contract Date.......................................17
Free Look Right to Cancel Contract...................................18
PREMIUMS......................................................................18
Premiums.............................................................18
Premiums to Prevent Lapse............................................19
ALLOCATIONS AND TRANSFERS.....................................................20
Premium Allocations and Crediting....................................20
Transfer Privilege...................................................20
Dollar Cost Averaging Plan...........................................21
Portfolio Rebalancing Plan...........................................21
FIXED ACCOUNT.................................................................22
Minimum Guaranteed and Current Interest Rates........................22
Calculation of Fixed Account Value...................................22
Delay of Payment.....................................................22
CHARGES AND DEDUCTIONS........................................................22
Premium Expense Charge...............................................22
Monthly Deduction....................................................23
Daily Mortality and Expense Risk Charge..............................24
Transfer Processing Fee..............................................24
Surrender Charge.....................................................25
Partial Surrender Fee................................................25
Fund Expenses........................................................25
Reduced Charges for Eligible Groups..................................25
Other Tax Charge.....................................................26
HOW YOUR CONTRACT VALUES VARY.................................................26
Bonus on Contract Value in the Variable Account......................26
Determining the Contract Value.......................................26
Cash Surrender Value.................................................27
DEATH BENEFIT AND CHANGES IN SPECIFIED AMOUNT.................................27
Amount of Death Benefit Proceeds.....................................27
Coverage Options.....................................................27
Initial Specified Amount and Coverage Option.........................28
Changes in Coverage Option...........................................28
Changes in Specified Amount..........................................28
Selecting and Changing the Beneficiary...............................29
CASH BENEFITS.................................................................29
Contract Loans.......................................................29
Surrendering the Contract for Cash Surrender Value...................30
Partial Surrenders...................................................30
Maturity Benefit.....................................................31
Payment Options......................................................31
Specialized Uses of the Contract.....................................31
Illustrations.................................................................31
Assumptions..........................................................32
Charges Illustrated..................................................32
OTHER CONTRACT BENEFITS AND PROVISIONS........................................45
Limits on Rights to Contest the Contract.............................45
Changes in the Contract or Benefits..................................45
Payment of Proceeds..................................................45
Reports to Contract Owners...........................................46
Assignment...........................................................46
Reinstatement........................................................46
Supplemental and/or Rider Benefits...................................46
Tax Considerations............................................................49
Introduction.........................................................49
Tax Status of the Contract...........................................49
Tax Treatment of Contract Benefits...................................50
Our Income Taxes.....................................................51
Possible Tax Law Changes.............................................51
OTHER INFORMATION ABOUT THE CONTRACTS AND KANSAS CITY LIFE....................51
Sale of the Contracts................................................51
Telephone Authorizations.............................................52
Kansas City Life Directors and Executive Officers....................52
State Regulation.....................................................54
Additional Information...............................................54
Experts..............................................................54
Litigation...........................................................54
Company Holidays.....................................................54
Legal Matters........................................................54
Financial Statements.................................................54
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.
<TABLE>
<CAPTION>
DEFINITIONS
<S> <C>
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 Loan Balance.
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. Option C provides a
Death Benefit at least equal to the Specified Amount plus Premiums paid, minus the amount of any
partial surrenders.
Death Benefit Proceeds The amount of Proceeds payable upon the Insured's death.
Fixed Account Value Measure of value accumulating in the Fixed Account.
Grace Period A 61-day period we provide when there is insufficient value in your Contract and after which 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.
Insured The person whose life we insure under the Contract.
Lapse Termination of the Contract because there is not enough value in the Contract when the Grace
Period ends.
Loan Account 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.
Loan Balance The sum of all outstanding Contract loans plus accrued interest.
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, Your The person entitled to exercise all rights and privileges of the Contract.
Planned Premiums The amount and frequency of Premiums 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 as to future Premiums.
Premium (s) The amount(s) you pay to purchase the Contract. It includes both Planned Premiums 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, Option B or Option C 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.
Valuation Day Each day on which the New York Stock Exchange is 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/Written Request A written notice or written request in a form satisfactory to us that is signed by the Owner and
received at the Home Office.
</TABLE>
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 31.)
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. However, there is a guaranteed
Minimum Death Benefit Rider available which provides a Death Benefit guarantee
subject to certain requirements. (See Supplemental and/or Rider Benefits, page
47.) We do guarantee to keep the Contract in force during the first five years
of the Contract as long as you meet certain Premium requirements. (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 "Premiums to Prevent Lapse," page 17.) 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.)
We offer other variable life insurance contracts that may have different death
benefits, contract features and optional programs. These contracts also have
different charges that would affect your sub-account performance and Contract
Value. To obtain more information about these other contracts, contact your
registered representative.
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.) (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 31.) Contract Values in the
illustrations based on current charges reflect a bonus that we may credit on
Variable Account Values in excess of $25,000. 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. Due to lack of guidance, however, there is uncertainty in this
regard with respect to Contracts issued on a substandard basis, particularly if
you pay the full amount of Premiums permitted under the Contract. 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.
Owner Inquiries. 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.
DIAGRAM OF THE CONTRACT
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PREMIUMS
o You select a payment plan (Planned Premium), but you are not required to
pay Premiums according to the plan. You may vary the amount and frequency
of the Planned Premiums and may skip Planned Premiums. (See page 18 for
rules and limits.)
o The Contract's minimum initial Premium and Planned Premium 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 Premiums at any time, subject to certain limitations.
(See page 18.)
o Under certain circumstances, which include taking excessive Contract loans,
you may have to pay extra Premiums to prevent lapse. (See page 19.)
--------------------------------------------------------------------------------
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DEDUCTIONS FROM PREMIUMS
o We deduct a Premium expense charge of 6.35% of all Premiums to cover any
state or local premium taxes and administrative expenses. (See page 22.)
--------------------------------------------------------------------------------
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ALLOCATION OF PREMIUMS
o You direct the allocation of Premiums among the 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 21 for rules and limits on
transfers from the Fixed Account allocations.)
--------------------------------------------------------------------------------
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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 made up of two parts: a flat charge and a per thousand charge.
The flat charge is $7.50 per month and this amount is guaranteed. The per
thousand charge may be up to $.05 per month for each $1,000 of Specified
Amount. We are currently not charging the per thousand portion of the
monthly expense charge (See page 22.)
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.
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DEDUCTIONS FROM ASSETS
o There is a daily charge at an annual rate of 0.50% from the Subaccounts for
mortality and expense risks. (See page 24.) This rate is guaranteed not to
increase. 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 25.) 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 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/ 0.09% 0.11% 0.15% 0.16% 0.30% 0.46%
Total Annual Fund Expenses 1/ 0.84% 0.86% 0.90% 0.91% 1.05% 1.06%
Expense Reimbursement2/ _NA_ _NA_ _NA_ _NA_ (0.14%) (0.30%)
Net Annual Fund Expenses1/ 0.84% 0.86% 0.90% 0.91% 0.91% 0.76%
</TABLE>
<TABLE>
<CAPTION>
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% 1.34% 1.00%
Other Expenses 3/ 0.00% 0.00% 0.00% 0.00%
Total Annual Fund Expenses3/ 1.00% 0.70% 1.34% 1.00%
</TABLE>
<TABLE>
<CAPTION>
Federated Federated Federated Federated
American High Income Prime International
Leaders Bond Money Small
Fund II Fund II Fund II Company
Fund II
<S> <C> <C> <C> <C>
Federated Insurance Series Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.75% 0.60% 0.50% 1.25% 4/
Rule 12b-1 Fees 6/ NA NA NA 0.25%
Shareholder Services Fee 5/ 0.25% 0.25% 0.25% 0.25%
Other Expenses7/ 0.13% 0.19% 0.23% 1.00%
Total Annual Fund Expenses 6/ 1.13% 1.04% 0.98% 2.75%
Waiver of Fund Expenses6/ 8/ (0.25%) (0.25%) (0.25%) (0.25%)
Net Annual Fund Expenses6/6/ 8/ 0.88% 0.79% 0.73% 2.50%
</TABLE>
<TABLE>
<CAPTION>
Dreyfus 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 0.03% 0.03%
Total Annual Fund Expenses 0.78% 0.78%
</TABLE>
<TABLE>
<CAPTION>
Dreyfus Stock
Index Fund
<S> <C>
Dreyfus Stock Index Fund Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.25%
Other Expenses9/ 0.01%
Net Annual Fund Expenses9/ 0.26%
</TABLE>
<TABLE>
<CAPTION>
The Dreyfus
Socially
Responsible
Growth Fund,
Inc.
<S> <C>
The Dreyfus Socially Responsible Growth Fund, Inc.
Annual Expenses (as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.75%
Other Expenses 9/ 0.04%
Net Annual Fund Expenses9/ 0.79%
</TABLE>
<TABLE>
<CAPTION>
JP Morgan JP Morgan
U.S. Small Company
Disciplined Portfolio
Equity
Portfolio
<S> <C> <C>
J.P. Morgan Series Trust II Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.35% 0.60%
Other Expenses 0.52% 1.97%
Total Annual Fund Expenses 10/ 0.87% 2.57%
Expense Reimbursement10/ (0.02%) (1.42%)
Net Annual Fund Expenses10/ 0.85% 1.15%
</TABLE>
<TABLE>
<CAPTION>
Templeton
Templeton Developing
International Franklin Small Franklin Real Markets
Securities Cap Fund (Class Estate Fund Securities Fund
Fund Class 2 2) 14/ (Class 2) (Class 2) 15/
11/
<S> <C> <C> <C> <C>
Franklin Templeton Variable Insurance Products Trust Annual
Expenses (as a percentage of average net assets) 12/
Management Fees (Investment Advisory Fees) 0.69% 0.55% 0.56% 13/ 1.25%
Rule 12b-1 Fees 12/ 0.25% 0.25% 0.25% 0.25%
Other Expenses 0.19% 0.27% 0.02% 0.31%
Total Annual Fund Expenses 1.13% 1.07% 0.83% 1.81%
</TABLE>
<TABLE>
<CAPTION>
Calamos
Convertible
Portfolio
<S> <C>
Calamos Advisors Trust Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.75%
Other Expenses 9.11%
Total Annual Fund Expenses 9.86%
Expense Reimbursement (8.86)%
Net Annual Fund Expenses16/ 1.00%
</TABLE>
<TABLE>
<CAPTION>
AIM V.I. AIM V.I. AIM V.I.
Dent Telecommunications Value
Demographic and Technology Fund
Trends Fund Fund
<S> <C> <C> <C>
A I M Variable Insurance Funds
Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.85% 17/ 1.00% 0.61%
Other Expenses 0.55% 18/ 0.27% 0.15%
Total Annual Fund Expenses 1.40% 1.27% 0.76%
</TABLE>
<TABLE>
<CAPTION>
Seligman Capital Seligman Communications
Portfolio and Information Portfolio
(Class 2) (Class 2)
<S> <C> <C>
Seligman Portfolios, Inc. Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.40% 0.75%
Rule 12b-1 Fees 19/ 0.25% 0.25%
Other Expenses 20/ 0.19% 0.11%
Total Annual Fund Expenses 0.84% 1.11%
Waiver of Fund Expenses NA 20/ NA 20/
Net Annual Fund Expenses 0.84% 20/ 1.11% 20/
</TABLE>
__________________________
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. "Other Expenses" do not take into account these expense
reductions and are therefore higher than the actual expenses of the
series. Had these fee reductions been taken into account, "Net
Expenses" would be lower for certain series and would equal:
0.83% for Emerging Growth Series 0.90% for Utilities Series
0.85% for Research Series 0.90% for Global Governments Series
0.89% for Total Return Series 0.75% for Bond Series
2/ MFS has contractually agreed, subject to reimbursement, to bear
expenses for these series such that each such series' "Other Expenses"
(after taking into account the expense offset arrangement described
above), do not exceed the following percentages of the average daily
net assets of the series during the current fiscal year:
0.15% for Global Governments Series 0.15% for Bond Series
These contractual fee arrangements will continue until at least May 1,
2001, unless changed with the consent of the board of trustees which
oversees the 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.
4/ The adviser expects to voluntarily waive a portion of the management
fee. The adviser can terminate this waiver at any time. The maximum
management fee is 1.25%.
5/ The shareholder services provider expects to voluntarily waive a
portion of its fee during the fiscal year ending December 31, 2000.
The maximum shareholder services fee is 0.25%.
6/ The Fund has no present intention of paying or accruing the
distribution fee during the fiscal year ending December 31, 2000. The
maximum distribution fee is 0.25%.
7/ Since the Fund recently commenced operations, Other Expenses is based
on estimates for the current year.
8/ The waiver amount shown in the table reflects only the waiver of the
Rule 12b-1 Fees. After deducting the amount of voluntary waivers, the
Net Annual Fund Expenses would be 1.50%.
9/ The Dreyfus Socially Responsible Growth Fund, Inc. and Dreyfus Stock
Index Fund reimburse their investment adviser, The Dreyfus
Corporation, for certain expenses relating to servicing and/or
maintaining shareholder accounts. These expenses are reflected as part
of "Other Expenses." The Dreyfus Corporation has agreed that these
expenses will not exceed an annual rate of 0.25% of 1.00% of each
Fund's average daily net assets.
10/ 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 U.S. Disciplined 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, 1999,
Morgan Guaranty has agreed to reimburse the portfolios for expenses
under this agreement as follows: $7,543 for the U.S. Disciplined
Equity and $129,795 for the Small Company.
11/ On 2/8/00, shareholders approved a merger and reorganization that
combined the Fund with theTempleton International Equity Fund,
effective 5/1/00. The shareholders of that Fund had approved new
management fees, which apply to the combined Fund effective 5/1/00.
The table shows restated total expenses based on the new fees and the
assets of the Fund as of 12/31/99, and not the assets of the combined
Ffund. However, if the table reflected both the new fees and the
combined assets, the Fund's expenses after 5/1/00 would be estimated
as: Management Fees 0.65%, Distribution and Service Fees 0.25%, Other
Expenses 0.20%, and Total Fund Operating Expenses 1.10%.
12/The Fund's class 2 distribution plan or "rule 12b-1 plan" is described
in the Fund's prospectus.
13/ The Fund administration fee is paid indirectly through the management
fee.
14/ On 2/8/00, a merger and reorganization was approved that combined the
assets of the Fund with a similar fund of the Templeton Variable
Products Series Fund, effective 5/1/00. On 2/8/00, Fund shareholders
approved new management fees, which apply to the combined Fund
effective 5/1/00. The table shows restated Total Annual Fund Expenses
based on the new fees and assets of the Funds as of 12/31/99, and not
the assets of the combined Fund. However, if the table reflected both
the new fees and the combined assets, the Fund's expenses after 5/1/00
would be: Management Fees 0.55%, Rule 12b-1 Fees 0.25%, Other Expenses
0.27%, and Total Annual Fund Expenses 1.07.
15/ On 2/8/00, shareholders approved a merger and reorganization that
combined the Fund with the Templeton Developing Markets Equity Fund,
effective 5/1/00. The shareholders of that Fund had approved new
management fees, which apply to the combined Fund effective 5/1/00.
The table shows restated Total Annual Fund Expenses based on the new
fees and the assets of the Fund as of 12/31/99, and not the assets of
the combined Fund. However, if the table reflected both the new fees
and the combined assets, the Fund's expenses after 5/1/00 would be
estimated as: Management Fees 1.25%, Rule 12b-1 Fees 0.25%, Other
Expenses 0.29%, and Total Annual Fund Expenses 1.79%.
16/ Pursuant to a written agreement the investment manager has voluntarily
undertaken to waive fees and/or reimburse portfolio expenses so that
the Total Annual Fund Expenses are limited to 1.00% of the portfolio's
average net assets. The fee waiver and/or reimbursement is binding on
the investment manager through May 31, 2001.
17/ The advisor receives a management fee calculated at the annual rate of
0.85% of the first $2 billion of average daily net assets and 0.80% of
the average daily net assets over $2 billion.
18/ Since the Fund recently commenced operations, Other Expenses is based
on estimates for the current year.
19/ Under a Rule 12b-1 Plan adopted by the Fund with respect to each
Portfolio, Class 2 shares pay annual 12b-1 Fees of up to 0.25% of
average net assets. Each Portfolio pays this fee to Seligman Advisors,
Inc., the principal underwriter of the Portfolio's shares. Seligman
Advisors uses this fee to make payments to participating insurance
companies or their affiliates for services that the participating
insurance companies provide to Contract owners of Class 2 shares, and
for distribution related expenses. Because these 12b-1 Fees are paid
out of the Portfolio's assets on an ongoing basis, over time they will
increase the cost of a Contract owner's investment and may cost you
more than other types of sales charges.
20/ The manager of Seligman Capital Portfolio and Seligman Communications
and Information Portfolio has voluntarily agreed to reimburse "Other
Expenses" of the Portfolio to the extent they exceed 0.20% per annum
of average daily net assets. No expenses were reimbursed in 1999. This
agreement is not binding on the manager.
--------------------------------------------------------------------------------
CONTRACT VALUE
o It is the starting point for calculating certain values under a Contract,
such as the Cash Surrender Value and the Death Benefit.
o Contract Value is equal to Premiums (less the Premium expense charge), as
adjusted each Valuation Day to reflect: Subaccount investment experience,
interest credited on Fixed Account Value, charges deducted and other
Contract transactions. (See page 25.)
o It varies from day to day. There is no minimum guaranteed Contract Value.
The Contract may lapse if the Contract Value is insufficient to cover a
Monthly Deduction due. (See page 25.)
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 24 for rules and limits.)
o We may credit a "bonus" to the Variable Account Value on each Monthly
Anniversary Day when the Variable Account Value exceeds $25,000. The
monthly bonus equals 0.2083 % (0.25% on an annualized basis) of the amount
of Variable Account Value in excess of $25,000. 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 29 for rules and limits.) Loans may have
adverse tax consequences.
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 25 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 surrender charge based on the Specified Amount at issue 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 30.)
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 31.)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
DEATH BENEFITS
o Death Benefits pass income tax free to the Beneficiary.
o They are available as lump sum or under a variety of payment options.
o The Minimum Specified Amount is $100,000 for issue Ages 0-49 and $50,000
for issue Ages 50-80. We may allow these minimum limits to be reduced. (See
page 17.)
o There are three Coverage Options available:
Option A-- at least equal to the Specified Amount
Option B-- at least equal to the Specified Amount plus Contract Value (See
page 27.)
Option C-at least equal to the Specified Amount plus total Premiums paid,
minus the amount of any partial surrenders. (See page XX.) Option C is only
available at issue.
o A Guaranteed Minimum Death Benefit Rider is also available on this Contract
(if requested). This rider guarantees the payment of the Contract Death
Benefit, regardless of the investment performance of the Subaccount. The
cumulative Guaranteed Minimum Death Benefit Rider Premium requirement must
be met in order for this guarantee to remain in effect. (see Supplemental
and/or Rider Benefits, page 47.)
o There is flexibility to change the Coverage Option and Specified Amount.
However, Coverage Option C is only available at issue. (See page 27 for
rules and limits.)
o There are supplemental and/or rider benefits that may be available. (See
page 46.)
o We deduct any Loan Balance from the amount payable.
--------------------------------------------------------------------------------
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.
Not all Funds may be available in all states.
MFS Variable Insurance TrustSM
MFS Emerging Growth Series (Manager: MFS Investment Management). 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 (Manager: MFS Investment Management). 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 (Manager: MFS Investment Management). 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 (Manager: MFS Investment Management). 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% of
its assets in equity and debt securities of both domestic and foreign (including
emerging market) companies in the utilities industry.
MFS Global Governments Series (Manager: MFS Investment Management). The
Global Governments Series seeks income and capital appreciation. The Series
invests, under normal market conditions, at least 65% of its total assets in
U.S. government securities, foreign government securities, corporate bonds,
mortgage-backed securities, asset-backed securities, and derivative securities.
MFS Bond Series (Manager: MFS Investment Management). 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."
American Century Variable Portfolios, Inc.
American Century VP Capital Appreciation Portfolio (Manager: American
Century Investment Management, Inc.) . 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(Manager: American Century Investment
Management, Inc.) . 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 (Manager: American Century
Investment Management, Inc.) . 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. International investment involves special risk
considerations. These include economic and political conditions, expected
inflation rates and currency swings.
American Century VP Value (Manager: American Century Investment Management,
Inc.). 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.
Federated Insurance Series
Federated American Leaders Fund II. (Manager: Federated Investment
Management Company).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(Manager: Federated Investment Management
Company). 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."
Federated International Small Company Fund II (Manager: Federated Gloval
Investment Management Corp). The investment objective is to provide long-term
growth of capital. The Fund pursues its investment objective by investing at
least 65% of its assets in equity securities of foreign companies that have a
market capitilization at the time of purchase of $1.5 billion or less.
Federated Prime Money Fund II(Manager: Federated Investment Management
Company). 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
Appreciation Portfolio (Manager: The Dreyfus Corporation; Sub-Investment
Advisor: Fayez Sarofim & Co.). The portfolio seeks long-term capital growth
consistent with the preservation of capital; current income is a secondary goal.
To pursue these goals the portfolio invests in common stocks focusing on "blue
chip" companies with total market values of more than $5 billion at the time of
purchase.
Small Cap Portfolio (Manager: The Dreyfus Corporation). The portfolio seeks
to maximize capital appreciation. To pursue this goal, the portfolio generally
invests at least 65% of its assets in the common stock of U.S. and foreign
companies. The portfolio focuses on small-cap companies with total market values
of less than $1.5 billion.
Dreyfus Stock Index Fund
(Manager: The Dreyfus Corporation; Index Fund Manager: Mellon Equity Associates)
The fund seeks to match the total return of the Standard & Poor's 500 Composite
Stock Price Index. To pursue this goal, the fund generally invests in all 500
stocks in the S&P 500 in proportion to their weighting in the index. The S&P
500 is an unmanaged index of 500 common stocks chosen to reflect the industries
of the U.S. economy and is often considered a proxy for the stock market in
general. Each stock is weighted by its market capitalization, which means larger
companies have greater representation in the index than smaller ones. The fund
may also use stock index futures as a substitute for the sale or purchase of
securities. The fund is not sponsored, endorsed, sold or promoted by Standard &
Poor's and Standard & Poor's makes no representation regarding the advisability
of investing in the fund.
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, with current income as a secondary
goal. To pursue these goals, the fund invests 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.
J.P. Morgan Series Trust II
J.P. Morgan U.S. Disciplined Equity Portfolio (Manager: J.P. Morgan
Investment Management Inc.). J.P. Morgan U.S. Disciplined Equity Portfolio seeks
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 stocks of U.S. corporations typically represented by the Standard &
Poor's 500 Stock Index with market capitalizations above $1.5 billion.
J.P. Morgan Small Company Portfolio (Manager: J.P. Morgan Investment
Management Inc.). 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.
Franklin Templeton Variable Insurance Products Trust
Effective May 1, 2000, each fund in the Templeton Variable Products Series Fund
merged with the similar, corresponding fund of the Franklin Templeton Variable
Insurance Products Trust.
Templeton International Securities Fund (Class 2) (Manager: Templeton
Investment Counsel, Inc.). The investment objective of Templeton International
Securities Fund is long-term capital growth. The Fund invests in equity
securities of companies located outside the United States, including those in
emerging markets.
Franklin Small Cap Fund (Class 2) (Manager: Franklin Advisers, Inc.). The Fund's
investment goal is long-term capital growth. Under normal market conditions, the
Fund will invest at least 65% of its total assets in the equity securities of
U.S. small capitalization (small cap) companies. For this Fund, small cap
companies are those companies with market cap values not exceeding (i) $1.5
billion; or (ii) the highest market cap value in the Russell 2000 Index;
whichever is greater at the time of purchase.
Franklin Real Estate Fund (Class 2) (Manager: Franklin Advisers, Inc). The
Fund's principal investment goal is capital appreciation. Its secondary goal is
to earn current income. Under normal market conditions, the Fund will invest at
least 65% of its total assets in securities of companies operating in the real
estate industry.
Templeton Developing Markets Securities Fund (Class 2) (Manager: Templeton Asset
Management Ltd.) The Fund's investment goal is long-term capital appreciation.
Under normal market conditions, the Fund will invest at least 65% of its total
assets in emerging market equity securities.
Calamos Advisors Trust
(Manager: Calamos Asset Management, Inc.)
Calamos Convertible Portfolio (Manager: Calamos Asset Management, Inc.).
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.
A I M Variable Insurance Funds
AIM V.I. Dent Demographic Trends Fund (Manager: A I M Advisors, Inc.). The
investment objective is long-term growth of capital. The Fund seeks to meet its
objective by investing in securities of companies that are likely to benefit
from changing demographic, economic and lifestyle trends.
AIM V.I. Telecommunications and Technology Fund (Manager: A I M Advisors,
Inc.). The investment objective is long-term growth of capital. The Fund seeks
to meet its objective by investing primarily in equity securities of companies
throughout the world engaged in the development, manufacture or sale of
telecommunications and technology services or equipment.
AIM V.I. Value Fund (Manager: A I M Advisors, Inc.). The investment
objective is to achieve long-term growth of capital. Income is a secondary
objective. The Fund seeks to meet its objectives by investing primarily in
equity securities judged by the Fund's investment advisor to be undervalued
relative to the investment advisor's appraisal of the current or projected
earnings of the companies issuing the securities or relative to the equity
market generally.
Seligman Portfolios, Inc.
Seligman Capital Portfolio (Class 2) (Manager: J. & W. Seligman & Co.
Incorporated). The objective is capital appreciation. The Portfolio invests
primarily in the common stock of medium-sized U.S. companies.
Seligman Communications and Information Portfolio (Class 2) (Manager: J. &
W. Seligman & Co. Incorporated). The Portfolio's objective is capital gain. The
Portfolio seeks to achieve this objective by investing at least 80% of its net
assets, exclusive of government securities, short-term notes, and cash and cash
equivalents, in securities of companies operating in the communications,
information and related industries. The Portfolio generally invests at least 65%
of its total assets in securities of companies engaged in these industries.
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 Premiums or transfers among the
Subaccounts.
We (or our affiliates) may receive significant compensation from a Fund's 12b-1
fees or from a Fund's investment adviser (or its affiliates) in connection with
administration, distribution, or other services provided with respect to the
Funds and their availability through the Contracts. The amount of this
compensation is generally based upon a percentage of the assets of the Fund
attributable to the Contracts and other contracts we issue. These percentages
differ and some Funds or their advisers (or affiliates) may pay us (or our
affiliates) more than others. Currently, these percentages range from 0.15% to
0.25%.
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, if further investment in any portfolio should become
inappropriate (in our judgment) in view of the purposes of the Variable Account,
or for any other reason in our sole discretion, we may redeem the shares, if
any, of that portfolio and substitute shares of another registered open-end
management investment company. The substituted fund may have different fees and
expenses. 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, or for any other reason in our
sole discretion. 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 de-register 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 and any shares held in our general
account 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 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 that is at least
equal to two Guaranteed Monthly Premiums. We require only one Guaranteed Monthly
Premium for Contracts when Premiums will be made under a pre-authorized payment
or combined billing arrangement. (See "Premiums," page 16.)
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 non-tobacco user basis, 15 through 80 on a preferred non-tobacco user basis,
and 15 through 80 on a tobacco user basis. (Tobacco user refers to use of
tobacco products in any form during the time period as defined in our
underwriting guidelines.) Age is determined on the Contract Date based on the
Insured's Age last birthday. 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 name a contingent Owner or a new Owner by
Written Notice. 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.)
Determination of Contract Date
In general, when applications are submitted with the required Premium, the
Contract Date will be the same as that of the TIA. For Contracts where the
required Premium Payment 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. There are several
exceptions to these rules described below.
Contract Date Calculated to be 29th, 30th or 31st of Month
No Contracts will be given a Contract Date of the 29th, 30th or 31st
of the month. When values are applied to the new Contract from another
contract and the Contract Date would be calculated to be one of these
dates, the Contract Date will be the 28th of the month. In all other
situations in which the Contract Date would be calculated to be the
29th, 30th or 31st of the month, the Contract Date will be the 1st of
the next month.
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 date of approval. Combined
Billing is a billing where multiple Kansas City Life contracts are
billed together.
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 date of
approval. If you request GA or FA and we don't receive the required
initial Premium the Contract Date will be the date 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 up to which the premiums
for the previous contract are paid. If you are converting more than
one term policy, the Contract Date will be determined by the contract
with the earliest date to which premiums are paid.
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 (and
receive a lower cost of insurance rate). 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.
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 10 days after you receive your Contract or, for an
increase in Specified Amount, your adjusted Contract.
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.
PREMIUMS
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 paying Premiums. You may make additional
Unscheduled Premiums at any time while the Contract is in force. We have the
right to limit the number (except in Texas) and amount of such Premiums. 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 22.)
Minimum Premium Amounts. The minimum initial Premium Payment required is
the least amount for which we will issue a Contract. This 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 Premiums you propose to make. (See "Planned Premiums," below.)
Consult your Kansas City Life agent for information about the initial Premium
required for the coverage you desire.
Each Premium after the initial Premium must be at least $25.
Maximum Premium Information. Total Premiums paid may not exceed premium
limitations for life insurance set forth in the Internal Revenue Code. We will
monitor Contracts and will notify you if a Premium 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 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 "Allocations and Transfers," page 20.)
General Premium Information. We will not accept Premiums after the Maturity
Date. You must make Premiums 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 "Contract Loans,"
page 29.)
Planned Premiums. When applying for a Contract, you select a plan for
paying Premiums. Failure to pay Planned Premiums will not necessarily cause a
Contract to lapse. Conversely, paying all Planned Premiums 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 Premiums 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 entirely. (See "Premiums to
Prevent Lapse," page 19, 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 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
Premiums are in line with the Guaranteed Monthly Premium requirement. For this
guarantee to apply the total Premiums 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.
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 re-calculate the Guaranteed Monthly Premium;
o notify you of the new Guaranteed Monthly Premium; and
o amend your Contract to reflect the change.
Premiums Upon Increase in Specified Amount. After an increase in the
Specified Amount, we will calculate a new Guaranteed Monthly Premium and this
amount will apply for the remainder of the Guaranteed Payment Period. We will
notify you of the new Guaranteed Monthly Premium for this period. If an increase
is made after the initial five Contract Years, there will be no Guaranteed
Payment Period applicable. Depending on the Contract Value at the time of an
increase and the amount of the increase requested, you may need to pay an
additional Premium or change the amount of Planned Premiums. (See "Changes in
Specified Amount," page 27.)
Premiums 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 "Minimum Guaranteed and Current
Interest Rates," page 22.)
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 27.) 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 15. 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 Premiums 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 26.)
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. 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. )
An excessive number of transfers, including short-term "market timing"
transfers, may adversely affect the performance of the underlying Fund in which
a Subaccount invests. If, in our sole opinion, a pattern of excessive transfers
develops, we have the right not to process a transfer request. We also have the
right not to process a transfer request when the sale or purchase of shares of a
Fund is not reasonably practicable due to actions taken or limitations imposed
by the Fund.
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 cannot 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 Premiums 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
20.) 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 have 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 6.35% Premium expense charge from each Premium. This charge
reimburses us for state and local premium taxes as well as related
administrative expenses associated with the Contracts. We apply Premiums 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 a Contract," page 15.) 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.
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 at issue, 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 Tobacco User-available issue Ages 15-80
o Preferred Tobacco User-available issue Ages 15-80
o Standard Non-tobacco User-available issue Ages 0-80
o Preferred Non-tobacco User-available issue Ages 15-80
We may place an Insured in a substandard risk class, which involves a higher
mortality risk than the Standard Tobacco User or Standard Non-Tobacco User
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 non-tobacco user 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 non-tobacco user or tobacco
user standard class are lower than guaranteed rates for an Insured of the same
Age, sex and tobacco user class in a substandard class.
We may make a profit from this charge. Any profit may be used to finance
distribution expenses.
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 41.) In the case of a term conversion, the risk
class that applies to the increase is based on the provisions of the term
contract. In the case of an increase under the Option to Increase Specified
Amount Rider, the Insured's risk class for an increase is the class in effect on
the initial Specified Amount at the time that you elect the increase.
We determine the net amount at risk associated with a Specified Amount increase
by determining the percentage that the Specified Amount increase bears to the
Contract's total Specified Amount immediately following the increase. The
resulting percentage is the part of the Contract's total net amount at risk that
we attribute to the Specified Amount increase. We attribute the remaining
percentage of the Contract's total net amount at risk to the existing Specified
Amount. (For example, if the Contract's Specified Amount is increased by
$100,000 and the total Specified Amount is $250,000, then we attribute 40% of
the total net amount at risk to the Specified Amount increase.) On each Monthly
Anniversary Day, the net amount at risk we use to determine the cost of
insurance charge associated with the Specified Amount increase is the Contract's
total net amount of risk at that time, multiplied by the percentage calculated
as described above. This percentage remains fixed until the Specified Amount is
changed.
We may make a profit from this charge. Any profit may be used to finance
distribution expenses.
Legal Considerations Relating to Sex-Distinct Premiums and Benefits. Cost
of insurance rates for Contracts generally distinguish between males and
females. Thus, Premiums 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 15.) 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. This charge is $7.50 per month and is guaranteed.
(2) a per thousand charge which is guaranteed never to exceed $.05 per
thousand of Specified Amount per month. We currently are not charging
the per thousand portion of the monthly expense charge.
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 46.)
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 charge is at
an annual rate of 0.50% of net assets. The amount of this charge is guaranteed.
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 telephone request or Written 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 or lapses. The
surrender charge is based on the Specified Amount at issue. We calculate this
charge by multiplying the surrender charge factor for the applicable age, sex
and risk class by the surrender charge percentages for the Insured's issue age
and then by the Specified Amount, divided by 1,000.
The total surrender charge will not exceed the maximum surrender charge shown 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.
The surrender charges calculated are applicable at the end of each Contract
Year. After the first Contract Year, we will pro rate the surrender charges
between Contract Years. However, after the end of the 15th Contract Year, there
will be no surrender charge.
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 Fund deducts investment advisory fees and other 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 currently assess a charge to cover income and Premium taxes incurred as a
result of the operations of the Subaccount. We . We reserve the right to assess
increased charges for additional taxes against the Subaccounts based on future
changes in tax codes.
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 Premiums to Prevent Lapse," page 19) and the
Guaranteed Payment Period is not then in effect, the Contract will be in default
and a Grace Period will begin. (See Guaranteed Payment Period and Guaranteed
Monthly Premium, page 18, and Grace Period, page 19.) However, we also offer an
optional Guaranteed Minimum Death Benefit Rider which guarantees the Death
Benefit provided certain requirements are met. (See Supplemental and/or Rider
Benefits, page 47.)
Bonus on Contract Value in the Variable Account
We may credit a bonus on amounts in the Variable Account that exceed $25,000. We
will credit any bonus on each Monthly Anniversary Day. The monthly bonus equals
0.2083% (0.25% on an annualized basis) of the Variable Account Value that
exceeds $25,000 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 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 the Loan Balance 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 Loan Balance. (See
"Premiums to Prevent Lapse," page 19 and "Surrendering the Contract for Cash
Surrender Value," page 30.)
DEATH BENEFIT AND CHANGES IN SPECIFIED AMOUNT
As long as the Contract remains in force, we will pay the Death Benefit Proceeds
upon receipt at the Home Office of satisfactory proof of the Insured's death. We
may require return of the Contract. We will pay the Death Benefit Proceeds in a
lump sum (See "Payment of Proceeds," page 45) or, if you prefer, under a payment
option (See "Payment Options," page 31). We will pay the Death Benefit Proceeds
to the Beneficiary. (See "Selecting and Changing the Beneficiary," page 29.)
Amount of Death Benefit Proceeds
The Death Benefit Proceeds are equal to the following:
o the Death Benefit under the Coverage Option selected calculated on the date
of the Insured's death; plus
o any supplemental and/or rider benefits; plus
o any cost of insurance charges deducted beyond the date of death; minus
o any Loan Balance on that date; minus
o any past due Monthly Deductions if the date of death occurred during a
Grace Period.
If the Guaranteed Minimum Death Benefit Rider is in effect, we guarantee the
payment of the Death Benefit, regardless of the performance of the Subaccounts.
(See Supplemental and/or Rider Benefits, page 47.)
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 three 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, but will
not fall below the Specified Amount..
o Option C: Death Benefit is at least equal to the Specified Amount plus the
total Premiums paid on the date of death minus any partial surrenders
(including surrender charges) made. The more premiums you pay and the less
you withdraw, the larger the death benefit will be.
To see how and when investment performance may begin to affect the Death
Benefit, see the illustrations beginning on page 31.
Under all three Coverage Options 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 have 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.
If the Coverage Option is Option B or Option C, it may be changed to Option A.
The new Specified Amount will be the Death Benefit as of the effective date of
the change. The Death Benefit will remain the same. The effective date of change
will be the Monthly Anniversary Day on or next following the date we receive and
approve your application for change.
If the Coverage Option is Option A or Option B you may not change it to Option
C. Coverage Option C is only available at issue.
If the Coverge Option is Option A or Option C, you may chnage it to Option B
subject to satisfactory evidence of insurability. The Specified Amount does not
change. The new Death Benefit will be the Specified Amount plus the Contract
Value as of the effective date of change. The effective date of change will be
the Monthly Anniversary Day on or following the date we approve your application
for change.
A change in Coverage Option may have tax consequences. (See "Tax
Considerations," page 43.) You should consult a tax adviser before changing the
Coverage Option.
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.
Changes in the Specified Amount may have tax consequences. You should consult a
tax adviser before changing the Specified Amount.
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.
A decrease in the Specified Amount will not affect the surrender charge and will
not decrease the Guaranteed Monthly Premium. (See "Surrender Charge," page 24.)
We have 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.
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 Premiums:
o a change in Planned Premiums may be advisable. (See "Premiums Upon Increase
in Specified Amount," page 18); and
o 18if 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.) The
new Guaranteed Monthly Premium will apply for the remainder of the
Guaranteed Payment Period. If an increase is made after the first five
Contract Years, no Guaranteed Payment Period will apply.
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 22). 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 45.)
Interest. We will charge interest on any Loan Balance 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 Loan Balance.
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 the
Loan Balance and the amount credited to the Loan Account). We will add the
interest earned on the Loan Account to the Fixed Account.
Preferred Loan Provision. Beginning in the eleventh Contract Year, an
additional type of loan is available. It is called a preferred loan. For a
preferred loan we will credit the amount in the Loan Account securing the
preferred loan with interest at an effective annual rate of 6.0%. Thus, the net
cost of the preferred loan is 0.0% per year. The maximum amount available for a
preferred loan is the Contract Value less Premiums paid. This amount may not
exceed the maximum loan amount. The preferred loan provision is not guaranteed.
The tax consequences of a preferred loan are uncertain. You should consult a tax
adviser if you are considering taking out a preferred loan.
Loan Repayment. You may repay all or part of your Loan Balance at any time
while the Insured is living and the Contract is in force. Each loan repayment
must be at least $10. 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 credit it as a Premium. (Premium expense charges do
not apply to loan repayments, unlike Premiums.) 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 44, 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 the Loan Balance from any Death Benefit Proceeds. (See "Amount of
Death Benefit Proceeds," page 27.)
Your Contract will be in default if the Loan Account Value on any Valuation Day
exceeds the Contract Value less any applicable surrender charge. We will send
you notice of the default. You will have a 61-day Grace Period to submit a
sufficient payment to avoid termination. The notice will specify the amount that
must be repaid to prevent termination. (See "Premiums to Prevent Lapse," page
19.)
Surrendering the Contract for Cash Surrender Value
You may surrender your Contract at any time for its Cash Surrender Value by
submitting a Written Request. A surrender charge may apply. (See "Surrender
Charge," page 24.) 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 45.) You may receive the Cash Surrender Value
in one lump sum or you may apply it to a payment option. (See "Payment Options"
page 31.) Your Contract will terminate and cease to be in force if you surrender
it for one lump sum. You will not be 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 25.) 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 22.) 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
have 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 Coverage Option C is in effect, any partial surrenders will reduce the amount
of total Premiums we use to calculate the Death Benefit. 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 45.)
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 100th 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 which guarantees continued
payments for the minimum amount of time selected, even if the payee dies before
we make the guaranteed number of payments. 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 43.)
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 Premiums 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 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 0.96% 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 2000 for some of the Portfolios. In the absence
of the reimbursement arrangements for some of the Portfolios, the average annual
expense ratio would be higher. Values illustrated would be lower if these
reimbursement arrangements had not been taken into account. For information on
the Portfolios' expenses, see the Fee Table in this Prospectus and 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 -1.45%, 4.52% and
10.49%, 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 guaranteed maximum charges that
are higher than our current cost of insurance charges. In addition, the bonus,
which, if paid, would partially offset the Monthly Deduction , is not guaranteed
and will be paid at our sole discretion. The current cost of insurance charges
and payment of the bonus on Variable Account Values in excess of $25,000 and,
alternatively, the guaranteed cost of insurance charges and nonpayment of the
bonus, are reflected in separate illustrations on each of the following pages.
The bonus is only applied in Contract Years in which the Variable Account Value
exceeds $25,000. All the illustrations reflect the fact that no charges for
Federal or state income taxes are currently made against the Variable Account
and assume that there is no Loan Balance or charges for supplemental and/or
rider benefits.
The illustrations are based on our sex distinct rates for non-tobacco users.
Upon request, we will furnish you with a comparable illustration based upon the
proposed Insured's individual circumstances. Such illustrations may assume
different hypothetical rates of return than those illustrated in the following
tables.
<TABLE>
<CAPTION>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION A
USING CURRENT COST OF INSURANCE RATES
BONUS PAID
Male, Standard Non-tobacco User, 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
2 2,153
3 3,310
4 4,526
5 5,802
6 7,142
7 8,549
8 10,027
9 11,578
10 13,207
15 22,657
20 34,719
25 50,113
30 69,761
------------ ------------------- --------- --------- ----------- -------- --------- -------- ------- --------- ---------
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>
<TABLE>
<CAPTION>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION A
USING GUARANTEED COST OF INSURANCE RATES
NO BONUS PAID
Male, Standard Non-Tobacco User, 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
2 2,153
3 3,310
4 4,526
5 5,802
6 7,142
7 8,549
8 10,027
9 11,578
10 13,207
15 22,657
20 34,719
25 50,113
30 69,761
------------ ------------------- --------- --------- ----------- -------- --------- -------- ------- --------- --------
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>
<TABLE>
<CAPTION>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION B
USING CURRENT COST OF INSURANCE RATES
BONUS PAID
Male, Standard Non-Tobacco User, 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
2 2,153
3 3,310
4 4,526
5 5,802
6 7,142
7 8,549
8 10,027
9 11,578
10 13,207
15 22,657
20 34,719
25 50,113
30 69,761
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>
<TABLE>
<CAPTION>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION B
USING GUARANTEED COST OF INSURANCE RATES
NO BONUS PAID
Male, Standard Non-Tobacco User, 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
2 2,153
3 3,310
4 4,526
5 5,802
6 7,142
7 8,549
8 10,027
9 11,578
10 13,207
15 22,657
20 34,719
25 50,113
30 69,761
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>
<TABLE>
<CAPTION>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION C
USING CURRENT COST OF INSURANCE RATES
BONUS PAID
Male, Standard Non-tobacco User, 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
2 2,153
3 3,310
4 4,526
5 5,802
6 7,142
7 8,549
8 10,027
9 11,578
10 13,207
15 22,657
20 34,719
25 50,113
30 69,761
------------ ------------------- --------- --------- ----------- -------- --------- -------- ------- --------- ---------
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>
<TABLE>
<CAPTION>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION C
USING GUARANTEED COST OF INSURANCE RATES
NO BONUS PAID
Male, Standard Non-Tobacco User, 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
2 2,153
3 3,310
4 4,526
5 5,802
6 7,142
7 8,549
8 10,027
9 11,578
10 13,207
15 22,657
20 34,719
25 50,113
30 69,761
------------ ------------------- --------- --------- ----------- -------- --------- -------- ------- --------- --------
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>
<TABLE>
<CAPTION>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION A
USING CURRENT COST OF INSURANCE RATES
BONUS PAID
Female, Standard Non-Tobacco User, 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
2 2,153
3 3,310
4 4,526
5 5,802
6 7,142
7 8,549
8 10,027
9 11,578
10 13,207
15 22,657
20 34,719
25 50,113
30 69,761
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>
<TABLE>
<CAPTION>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION A
USING GUARANTEED COST OF INSURANCE RATES
NO BONUS PAID
Female, Standard Non-Tobacco User, 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
2 2,153
3 3,310
4 4,526
5 5,802
6 7,142
7 8,549
8 10,027
9 11,578
10 13,207
15 22,657
20 34,719
25 50,113
30 69,761
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>
<TABLE>
<CAPTION>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION B
USING CURRENT COST OF INSURANCE RATES
BONUS PAID
Female, Standard Non-Tobacco User, 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
2 2,153
3 3,310
4 4,526
5 5,802
6 7,142
7 8,549
8 10,027
9 11,578
10 13,207
15 22,657
20 34,719
25 50,113
30 69,761
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>
<TABLE>
<CAPTION>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION B
USING GUARANTEED COST OF INSURANCE RATES
NO BONUS PAID
Female, Standard NonTobacco User, 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
2 2,153
3 3,310
4 4,526
5 5,802
6 7,142
7 8,549
8 10,027
9 11,578
10 13,207
15 22,657
20 34,719
25 50,113
30 69,761
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>
<TABLE>
<CAPTION>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION C
USING CURRENT COST OF INSURANCE RATES
BONUS PAID
Female, Standard Non-Tobacco User, 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
2 2,153
3 3,310
4 4,526
5 5,802
6 7,142
7 8,549
8 10,027
9 11,578
10 13,207
15 22,657
20 34,719
25 50,113
30 69,761
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>
<TABLE>
<CAPTION>
$1,000 ANNUAL PREMIUM
$100,000 SPECIFIED AMOUNT
COVERAGE OPTION C
USING GUARANTEED COST OF INSURANCE RATES
NO BONUS PAID
Female, Standard Non-Tobacco User, 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
2 2,153
3 3,310
4 4,526
5 5,802
6 7,142
7 8,549
8 10,027
9 11,578
10 13,207
15 22,657
20 34,719
25 50,113
30 69,761
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>
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 Loan Balance.
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 have 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.
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 Loan Balance. We will send notices to any assignee
we have on record concerning amounts required to be paid during a Grace Period
in addition to sending these notices to you.
Reinstatement
If your Contract lapses, you may reinstate it within two years (or longer period
if required by state law) after lapse and before the Maturity Date.
Reinstatement must meet certain conditions, including the payment of the
required Premium and proof of insurability. See your Contract for further
information.
Supplemental and/or Rider Benefits
The following supplemental and/or rider benefits are available and may be added
to your Contract. We will deduct monthly charges for these benefits and/or
riders from your Contract Value as part of the Monthly Deduction. All of these
riders may not be available in all states.
Guaranteed Minimum Death Benefit Rider (GMDB)
Issue Ages: Same as Contract; only available at issue
This rider guarantees the payment of the Death Benefit Proceeds at the
death of the Insured, regardless of the investment performance of the
Subaccounts. In order for this guarantee to apply, this rider must be still
be in effect and the cumulative Guaranteed Minimum Death Benefit Rider
requirement must be met.
There is no charge for this rider, but it must be requested at issue of the
Contract.
The Guaranteed Minimum Death Benefit Premium is the monthly Premium level
which guarantees that the Guaranteed Minimum Death Benefit Rider will
remain in in effect. The cumulative Guaranteed Minimum Death Benefit Rider
Premium requirement must be met for this guarantee to remain in effect.
This requirement is met if the cumulative paid Premiums equal or exceed the
cumulative Guaranteed Minimum Death Benefit Rider Premium requirement plus
any Loan Balance on each Monthly Anniversary Day. The cumulative paid
Premium is an amount equal to Premiums paid less partial surrenders each
accumulated at the guaranteed interest rate applicable to the Fixed
Account, to the date the cumulative Guaranteed Minimum Death Benefit Rider
Premium requirement is tested.
This benefit will only guarantee that the Contract Death Benefit will
remain in force. This benefit does not guarantee that any other rider
benefits will remain in force. All other Contract riders terminate at the
point the Contract would have terminated in the absense of this Guaranteed
Minimum Death Benefit Rider.
If the Contract includes any riders and the Cash Surrender Value is less
than or equal to zero after the Guaranteed Payment Period, you have the
following options:
1. terminate any other riders attached to this Contract and keep the
Death Benefit in force under the terms of this Guaranteed Minimum
Death Benefit Rider; or
2. pay sufficient Premiums to obtain a positive Cash Surrender Value
to avoid lapse of the Contract and any riders.
If one of the above options are not selected, we will terminate your
Contract and all riders.
If the cumulative Guaranteed Minimum Death Benefit Rider Premium
requirement is not met, the rider will be in default. We will send you
notice of the Premium required to maintain the rider. We will provide
a notice period of 61 days to pay the Premium and maintain the rider.
The period begins on the date that we mail the notice. The Premium in
default will be the amount by which the cumulative Guaranteed Minimum
Death Benefit Rider Premium requirement plus any Loan Balance is
greater that the cumulative paid Premium. If the cumulative Guaranteed
Minimum Death Benefit Rider Premium requirement is not met and is not
paid by the end of the notice period, this rider will terminate.
You may apply to have this rider reinstated within two years of
termination of such rider while the Contract is in force.
Reinstatement requires:
1. a Written Request to reinstate the rider;
2. evidence f insurability satisfactory to us, unless
reinstatement is request within one year after the beginning
of the notice period; and
3. payment of the amount by which the cumulative Guaranteed
Minimum Death Benefit Rider Premium plus any Loan Balance
exceeds the cumulative paid Premiums on the date of
reinstatement.
We have the right to deny reinstatement of the rider more than once
during the life of the Contract.
This benefit terminates on the earlier of:
1. the date the contract terminates for any reason;
2. the date you cancel this rider;
3. the Insured's Age 65; or
4. when the cumulative Guaranteed Minimum Death Benefit Rider
Premium requirement is not met subject to the notice period.
You may cancel this rider at any time. The cancellation will be
effective on the Monthly Anniversary Day on or next following the date
we receive your Written Request. We may require that the Contract be
submitted for endorsement to show the cancellation.
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.
Additional Life Insurance Rider (ALI)
Issue Ages: 0-80
This rider provides level yearly renewable term coverage on the Insured,
which counts towards the Death Benefit corridor. The minimum issue limit is
$25,000. The maximum term insurance coverage, including Other Insured
coverage on the primary Insured, is five times the Specified Amount. This
term insurance may be converted to a new permanent contract at any time the
rider is in force without evidence of insurability. If the contract has
Accidental Death Benefit coverage, it is also available on this rider.
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 Proceeds (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.
Under both options, the Death Benefit Proceeds and associated values will
be reduced at the time the benefit is initially calculated.
We can furnish you details about the amount of accelerated Death Benefit
Proceeds available to you if you are eligible and the adjusted Premiums
that would be in effect if less than the entire Death Benefit Proceeds are
accelerated.
When you request an acceleration of a portion of the Death Benefit Proceeds
under this rider you may direct how we deduct the amount from your Contract
Value in the Subaccounts and Fixed Account. If you provide no directions,
we will deduct the payment amount from your Contract Value in the
Subaccounts and Fixed Account on a pro rata basis. (See "Minimum Guaranteed
and Current Interest Rates" page 20.)
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 Additional Life Insurance 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 non-tobacco users and one risk
class for tobacco users. The non-tobacco cost of insurance rates for this rider
are generally between the Contract's preferred and standard non-tobacco rates.
The tobacco cost of insurance rates are near the Contract's tobacco rates. The
cost of insurance rates for the Additional Insurance 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 the
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 Premiums 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
generally be excludible from the gross income of the beneficiary.
Generally, the Owner will not be taxed on increases in 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.
If a Contract becomes a Modified Endowment Contract, distributions that occur
during the Contract Year will be taxed as distributions from a Modified
Endowment Contract. In addition, distributions from a Contract within two years
before it becomes a Modified Endowment Contract will be taxed in this manner.
This means that a distribution made from a Contract that is not a Modified
Endowment Contract could later become taxable as a distribution from a Modified
Endowment Contract.
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 preferred loans are 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. If a Contract loan is outstanding when a Contract is cancelled or
lapses, the amount of the outstanding Loan Balance will be added to the amount
distributed and will be taxed accordingly. 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.
Continuation of the Contract Beyond Age 100. 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.
Business Uses of the Contracts. 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.
Other Tax Considerations. The transfer of the Contract or designation of a
Beneficiary may have Federal, state, and/or local transfer and inheritance tax
consequences, including the imposition of gift, estate, and generation-skipping
transfer taxes. For example, the transfer of the Contract to, or the designation
as a Beneficiary of, or the payment of Proceeds to, a person who is assigned to
a generation which is two or more generations below the generation assignment of
the Owner may have generation-skipping transfer tax consequences under federal
tax law. The individual situation of each Owner or Beneficiary will determine
the extent, if any, to which federal, state, and local transfer and inheritance
taxes may be imposed and how ownership or receipt of Contract Proceeds will be
treated for purposes of federal, state and local estate, inheritance,
generation-skipping and other taxes.
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 addition, we may pay an asset-based commission of .20% of the Contract
Value beginning in the second Contract Year. In certain circumstances Sunset
Financial may pay additional commissions, other allowances and overrides.
Compensation may also be paid in the form of non-cash compensation, subject to
applicable regulatory requirements.
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.
<TABLE>
<CAPTION>
Name and Principal
Business Address * Principal Occupation During Past Five Years
<S> <C>
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. Chairman of the
Board of Sunset Life and Old American since October, 1999.
R. Philip Bixby Director, Kansas City Life; President and CEO since April, 1998; Vice Chairman of the
Board since January, 2000; 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. Director of Sunset Life and Old American, subsidiaries of
Kansas City Life. President of Sunset Life, subsidiary of Kansas City Life, since June,
1999.
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, Agency Administration, New Business and Underwriting. 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.
C. John Malacarne Director, Kansas City Life; Vice President, General Counsel and Secretary since 1991.
Responsible for Legal Department, Office of the Secretary, Stock Transfer Department and
Market Compliance. Director and Secretary of Sunset Life and Old American, subsidiaries
of Kansas City Life.
Robert C. Miller Senior Vice President, Administrative Services, since 1991. Responsible for Human
Resources and Home Office building and maintenance.
Webb R. Gilmore Director, Kansas City Life since 1990; Partner - Gilmore and Bell.
Nancy Bixby Hudson Director, Kansas City Life since 1996; Investor.
Warren J. Hunzicker, M.D. Director, Kansas City Life since 1989.
Daryl D. Jensen Director, Kansas City Life; Vice Chairman of the Board and President, Sunset Life
Insurance Company of America, a subsidiary of Kansas City Life, since 1975.
Michael J. Ross Director, Kansas City Life since 1972; President and Chairman of the Board, Jefferson
Bank and Trust Company, St. Louis, Missouri, since 1971.
Elizabeth T. Solberg Director, Kansas City Life since 1997; Executive Vice President and Senior Partner,
Fleishman-Hilliard, Inc. since 1984.
Larry Winn Jr. Director, Kansas City Life since 1985; Retired as the Kansas Third District
Representative to the U.S. Congress.
John K. Koetting Vice President and Controller since 1980; chief accounting officer; responsible for all
corporate accounting reports. Director of Old American, a subsidiary of Kansas City Life.
Mark A. Milton Vice President and Actuary since January, 2000; Elected Vice President and Associate
Actuary in 1989. Responsible for Actuarial and State Compliance. Director of Sunset Life,
a subsidiary of Kansas City Life.
<FN>
* The principal business address of all the persons listed above is 3520
Broadway, Kansas City, Missouri 64111-2565.
</FN>
</TABLE>
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 financial
statements included in this Prospectus:
o consolidated balance sheets for Kansas City Life at December 31, 1999
and 1998;
o related consolidated statements of income, stockholders' equity and
cash flows for the years ended December 31, 1999, 1998 and 1997;
o statement of net assets of the Variable Account at December 31, 1999;
o related statement of operations and changes in net assets for the
years ended December 31, 1999 and 1998.
The Independent Auditor's Reports are also included in this Prospectus and are
provided in reliance upon the authority of such firm as experts in accounting
and auditing.
Mark A. Milton, Vice President and 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.
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.
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 statements for the Variable Account
are also included in the Prospectus:
o statement of net assets of the Variable Account at December 31, 1999,
and
o related statement of operations and changes in net assets for the
periods ended December 31, 1999 and 1998.
<TABLE>
<CAPTION>
Appendix A
Initial Surrender Charge Factors
Per $1,000 of Specified Amount
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
Issue Age Female Male Issue Age Female Male Issue Age Female Male Issue Age Female Male
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 6.02 6.45 23 12.77 13.68 46 23.84 27.25 69 42.53 42.85
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
1 6.02 6.45 24 13.26 14.21 47 24.05 27.49 70 42.97 42.97
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
2 6.02 6.45 25 13.78 14.76 48 24.29 27.76 71 43.26 43.60
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
3 6.02 6.45 26 14.39 15.42 49 24.56 28.06 72 43.43 43.78
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
4 6.02 6.45 27 15.05 16.13 50 24.86 28.42 73 43.47 43.83
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
5 6.02 6.45 28 15.76 16.89 51 25.23 28.83 74 43.76 44.12
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
6 6.52 6.99 29 16.51 17.69 52 25.65 29.31 75 43.92 44.28
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
7 6.99 7.49 30 16.69 18.54 53 26.15 29.89 76 44.07 44.43
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
8 7.42 7.95 31 17.47 19.41 54 26.73 30.54 77 44.21 44.58
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
9 7.83 8.39 32 18.24 20.27 55 27.30 31.20 78 44.34 44.71
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
10 8.22 8.81 33 19.01 20.42 56 28.01 32.02 79 44.46 44.84
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
11 8.58 9.20 34 19.74 21.20 57 28.83 32.94 80 44.58 45.34
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
12 8.93 9.57 35 20.40 21.91 58 29.74 33.98 81 44.00 45.34
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
13 9.28 9.95 36 20.78 22.49 59 30.76 35.15 82 44.00 45.34
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
14 9.62 10.31 37 21.38 22.97 60 31.89 36.45 83 44.00 45.34
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
15 9.94 10.65 38 21.76 23.37 61 33.14 37.87 84 43.75 45.34
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
16 10.26 11.00 39 22.06 24.35 62 34.48 39.41 85 43.25 45.34
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
17 10.58 11.34 40 22.29 24.77 63 35.97 41.10
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
18 10.91 11.69 41 23.28 24.95 64 37.56 41.59
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
19 11.23 12.03 42 23.41 25.08 65 39.27 41.79
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
20 11.56 12.39 43 23.49 25.17 66 40.45 42.21
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
21 11.93 12.78 44 23.58 25.26 67 41.25 42.46
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
22 12.33 13.22 45 23.66 27.04 68 41.96 42.58
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ----------
</TABLE>
Appendix B
Surrender Charge Percentages of Initial Surrender Charge Factor
------------------------------- -----------------------------
End of Contract Year Percentage
------------------------------- -----------------------------
1 100%
------------------------------- -----------------------------
2 100%
------------------------------- -----------------------------
3 100%
------------------------------- -----------------------------
4 100%
------------------------------- -----------------------------
5 100%
------------------------------- -----------------------------
6 90%
------------------------------- -----------------------------
7 80%
------------------------------- -----------------------------
8 70%
------------------------------- -----------------------------
9 60%
------------------------------- -----------------------------
10 50%
------------------------------- -----------------------------
11 40%
------------------------------- -----------------------------
12 32%
------------------------------- -----------------------------
13 24%
------------------------------- -----------------------------
14 16%
------------------------------- -----------------------------
15 8%
------------------------------- -----------------------------
16+ 0%
------------------------------- -----------------------------
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
The By-Laws of Kansas City Life Insurance Company provide, in part, in
Article XII:
1. The Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit, or proceeding, whether civil, criminal, administrative or investigative,
other than an action by or in the right of the Company, by reason of the fact
that he or she is or was a Director, Officer or employee of the Company, or is
or was serving at the request of the Company as a Director, Officer or employee
of another company, partnership, joint venture, trust or other enterprise,
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the Company, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
or she reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his or her conduct was unlawful.
2. The Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the company to procure a judgment in its favor by
reason of the fact that he or she is or was a director, officer or employee of
the company, or is or was serving at the request of the company as a director,
officer or employee of another company, partnership, joint venture, trust or
other enterprise against expenses, including attorneys' fees, actually and
reasonably incurred by him or her in connection with the defense or settlement
of the action or suit if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
company; except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable
for negligence or misconduct in the performance of his or her duty to the
company unless and only to the extent that the court in which the action or suit
was brought determines upon application that, despite the adjudication of
liability and in view of all the circumstances of the case, the person is fairly
and reasonably entitled to indemnity for such expenses which the court shall
deem proper.
Missouri law authorizes Missouri corporations to provide indemnification to
directors, officers and other persons.
Kansas City Life owns a directors and officers liability insurance policy
covering liabilities that directors and officers of Kansas City Life and its
subsidiaries and affiliates may incur in acting as directors and officers.
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
REPRESENTATIONS RELATING TO FEES AND CHARGES
Kansas City Life Insurance Company hereby represents that the fees and charges
deducted under the contracts described in the S-6 Registration Statement are, in
the aggregrate, reasonable in relationship to the services rendered, the
expenses expected to be incurred, and the risks assumed by Kansas City Life
Insurance Company.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The prospectus consisting of 93 pages. Undertaking to file reports.
Rule 484 undertaking.
Representations relating to fees and charges.
The signatures.
Written consents of the following persons:
(a) C. John Malacarne, Esq.8/
(b) Mark A. Milton, Vice President and Actuary 8/
(c) Sutherland Asbill & Brennan.
(d) Independent Auditors.8/
The following exhibits, corresponding to those required by paragraph A of the
instructions as to exhibits in Form N-8B-2:
1.A. (1) Resolutions of the Board of Directors of Kansas City Life Insurance
Company establishing the Kansas City Life Variable Life Separate Account.
1/
(2) Not applicable.
(3) Distributing Contracts:
(a) Distribution Agreement between Kansas City Life Insurance Company
and Sunset Financial Services, Inc. 2/
(b) Not applicable
(c) Schedule of Sales Commissions 10/ [remove this footnote reference
if decide to include in this filing]
(4) Not applicable
(5) (a) Specimen Contract Form
(b) Additional Life Insurance Rider
(c) Guaranteed Minimum Death Benefit Rider
(d) Other Insured Term Insurance
(e) Temporary Life Insurance Agreement 2/
(f) Disability Continuance of Insurance 2/
(g) Disability Premium Benefit Rider 2/
(h) Accidental Death Benefit 2/
(i) Option to Increase Specified Amount 2/
(j) Spouse's Term Insurance 2/
(k) Children's Term Insurance 2/
(l) Maturity Extension Rider 4/
(m) Accelerated Death Benefit/Living Benefits Rider 5/
(6) (a) Restated Articles of Incorporation of Kansas City Life Insurance
Company 1/
(b) By-Laws of Kansas City Life Insurance Company
(7) Not applicable
(8) (a) Agreement between Kansas City Life Insurance Company,MFS Variable
Insurance Trust, and Massachusetts Financial Services Company.1
(b) Agreement between Kansas City Life Insurance Company, TCI
Portfolios, Inc. and Investors Research Corporation.1
(c) Agreement between Kansas City Life Insurance Company, Insurance
Management Series, and Federated Securities Corp.1
(d) Agreement between Kansas City Life Insurance Company and each of
Dreyfus Variable Investment Fund, The Dreyfus Socially
Responsible Growth Fund, Inc., and The Dreyfus Life and Annuity
Index Fund, Inc.3/
(e) Agreement between Kansas City Life Insurance Company and J.P.
Morgan Series Trust II.6/
(f) Agreement between Kansas City Life Insurance Company and each of
Calamos Insurance Trust, Calamos Asset Management, Inc. and
Calamos Financial Services, Inc.6/
(g) Form of Participation Agreement between Kansas City Life
Insurance Company and each of Franklin Templeton Variable
Insurance Products Trust and Franklin Templeton Distributors,
Inc.7/
(h) Amendment to Participation Agreement between Kansas City Life
Insurance Company and each of Dreyfus Variable Investment Fund,
The Dreyfus Socially Responsible Growth Fund, Inc. and Dreyfus
Life and Annuity Index Fund, Inc. (d/b/a Dreyfus Stock Index
Fund).6/
(i) Revised Exhibit B to Fund Participation Agreement between Kansas
City Life Insurance Company, Insurance Management Series, and
Federated Securities Corp.7/
(j) Form of Participation Agreement by and among AIM Variable
Insurance Funds, Inc., AIM Distributors, Inc., and Kansas City
Life Insurance Company.7/
(k) Form of Fund Participation Agreement between Kansas City Life
Insurance Company and Seligman Portfolios, Inc., Segliman
Advisors, Inc.7/
(9) Not applicable
(10) Application form
(11) Memorandum describing issuance, transfer, and redemption procedures
2. Opinion and consent of C. John Malacarne, Esq., as to the legality of the
securities being registered. 8/
3. Not applicable.
4. Not applicable.
5. Not applicable
6. Opinion and consent of Mark A. Milton, Vice President and Actuary, as to
actuarial matters pertaining to the securities being registered. 8/
7. (a) Consent of Ernst & Young LLP 8/
(b) Consent of KPMG LLP 8/
(c) Consent of Sutherland, Asbill & Brennan 8/
(d) Consent of C. John Malacarne. See Exhibit 2. 8/
B. Not applicable.
C. Not applicable.
2. Opinion and consent of C. John Malacarne, Esq., as to the legality of the
securities being registered.
3. Not applicable.
4. Not applicable.
5. Not applicable.
6. Opinion and consent of Mark A. Milton, Vice President and Actuary,
as to actuarial matters pertaining to the securities being
registered.
7. (a) Consent of Ernst & Young LLP.
(b) Consent of Sutherland Asbill & Brennan.
----------------------
1 Incorporated herein by reference to the Form S-6 Registration Statement
(File No. 33-95354) for Kansas City Life Variable Life Separate Account
filed on August 2, 1995.
2 Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Form N-4 Registration Statement (File No. 33-89984) for Kansas City Life
Variable Annuity Separate Account filed on August 25, 1995.
3 Incorporated herein by reference to the Form S-6 Registration Statement
(File No. 33-95354) filing for Kansas City Life Variable Life Separate
Account filed on April 18, 1997.
4 Incorporate herein by reference to Post-Effective Amendment No. 3 of the
S-6 Registration Statement (File No. 33-95354) filing for Kansas City Life
Variable Life Separate Account filed on April 30, 1998.
5 Incorporated herein by reference to the Form S-6 Registation Statement
(File No. 33-95354) filing for Kansas City Life Variable Life Separate
Account filed on January 29, 1999.
6 Incorporated herein by reference to the Form S-6 Registation Statement
(File No. 33-95354) filing for Kansas City Life Variable Life Separate
Account filed on April 19, 1999.
7 Incorporated herein by reference to Post-Effective Amendment No. 7 to the
Form N-4 Registration Statement (File No. 33-89984) for Kansas City Life
Variable Annuity Separate Account filed on August 28, 2000.
8 To be filed by amendment.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Kansas City Life Variable Life Separate Account, has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, and its seal to be hereunto affixed and attested, all in the
City of Kansas City and the State of Missouri, on the 23rd day of October 2000.
[SEAL] Kansas City Life
Variable Life Separate Account
-----------------------------
Registrant
Kansas City Life Insurance Company
-----------------------------
Depositor
Attest /s/ C. John Malacarne By: /s/ R. Philip Bixby
C. John Malacarne R. Philip Bixby, President,CEO and
Vice Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, Kansas City Life
Insurance Company has duly caused this Registration Statement to be signed on
its behalf by the following persons in the capacities indicated on the date(s)
set forth below.
Signature Title Date
/s/ R. Philip Bixby President, CEO, Vice Chairman October 23, 2000
R. Philip Bixby of the Board and Director
/s/ Richard L. Finn Senior Vice President, Finance October 23, 2000
Richard L. Finn and Director
(Principal Financial Officer)
/s/ John K. Koetting Vice President and Controller October 23, 2000
John K. Koetting (Principal Accounting Officer)
/s/ J. R. Bixby Chairman of the Board and October 23, 2000
J.R. Bixby Director
/s/ Walter E. Bixby III Director October 23, 2000
W. E. Bixby III
/s/Daryl D. Jensen Director October 23, 2000
Daryl D. Jensen
/s/ C. John Malacarne Director October 23, 2000
C. John Malacarne
/s/ Jack D. Hayes Director October 23, 2000
Jack D. Hayes
/s/Webb R. Gilmore Director October 23, 2000
Webb R. Gilmore
Warren J. Hunzicker, M.D. Director October 23, 2000
/s/Michael J. Ross Director October 23, 2000
Michael J. Ross
/s/Elizabeth T. Solberg Director October 23, 2000
Elizabeth T. Solberg
/s/E. Larry Winn, Jr. Director October 23, 2000
E. Larry Winn, Jr.
/s/Nancy Bixby Hudson Director October 23, 2000
Nancy Bixby Hudson
Exhibit Index List
1.A. (5) (a) Specimen Contract Form
(b) Rider
(c) Rider
(d) Rider
(10) Application form
(11) Memorandum describing issuance, transfer, and redemption procedures
OCTOBER 2000
DESCRIPTION OF ISSUANCE,
TRANSFER AND REDEMPTION PROCEDURES FOR CONTRACTS
PURSUANT TO RULE 6e-3(T)(b)(12)(iii)
FOR FLEXIBLE PREMIUM LIFE INSURANCE CONTRACTS
ISSUED BY
KANSAS CITY LIFE INSURANCE COMPANY
This document sets forth the current administrative procedures that will be
followed by Kansas City Life Insurance Company ("Kansas City Life") in
connection with its issuance of individual flexible premium variable life
insurance contracts (the "Contracts"), the transfer of assets held thereunder,
and the redemption by Contract owners (the "Owners") of their interests in those
Contracts. Capitalized terms used herein have the same meaning as in the
prospectus for the Contract that is included in the current registration
statement on Form S-6 for the Contract as filed with the Securities and Exchange
Commission ("Commission" or "SEC").
I. Procedures Relating to Purchase and Issuance of the Contracts and Acceptance
of Premiums
A. Offer of the Contracts, Applications, Initial Net Premiums, and Issuance of
the Contracts
1. Offer of the Contracts. The Contracts will be offered and sold for Premiums
pursuant to established premium schedules and underwriting standards in
accordance with state insurance laws. Premiums for the Contracts and related
insurance charges will not be the same for all Owners selecting the same
Specified Amount. Insurance is based on the principle of pooling and
distribution of mortality risks, which assumes that each Owner pays a premium
and related insurance charges commensurate with the Insured's mortality risk as
actuarially determined utilizing factors such as age, sex, level of specified
amount, health and occupation. A uniform premium and insurance charges for all
Insureds would discriminate unfairly in favor of those Insureds representing
greater risk. Although there will be no uniform insurance charges for all
Insureds, there will be a uniform insurance rate for all Insureds of the same
risk class and same band for cost of insurance rates. A description of the
Monthly Deduction under the Contract, which includes charges for cost of
insurance and for supplemental benefits, is in Appendix A to this memorandum.
2. Application. To purchase a Contract, the Owner must complete an application
and submit it through an authorized Kansas City Life agent. An application will
not be deemed to be complete unless all required information, including without
limitation age, sex, and medical and other background information, has been
provided in the application.
If the applicant is eligible for temporary insurance coverage, a temporary
insurance agreement "TIA") should also accompany the application. The TIA
provides temporary insurance coverage prior to the date when all underwriting
and other requirements have been met and the application has been approved, with
certain limitations, as long as an initial premium payment accompanies the TIA.
In accordance with Kansas City Life's underwriting rules, temporary life
insurance coverage may not exceed $250,000. The TIA may not be in effect for
more than 60 days. At the end of the 60 days, the TIA coverage terminates and
the initial premium will be returned to the applicant.
3. Payment of Minimum Initial Premium and Determination of Contract Date. With
the TIA, the applicant must pay an initial premium payment at the time of
application that is at least equal to two Guaranteed Monthly Premiums (one
Guaranteed Monthly Premium is required for Contracts when Premiums will be made
under a pre-authorized payment or combined billing arrangement). The minimum
initial premium payment required depends on a number of factors, such as the
age, sex and risk class of the proposed Insured, the Initial Specified Amount,
any supplemental and/or rider benefits and the Planned Premium Payment payments
the Owner proposes to make. (See "Planned Premiums," below.)
In general, when applications are submitted with the required premium payment
(and the premium payment is submitted in "good order") the Contract Date will be
the same as that of the TIA. For Contracts where the required 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. There are several exceptions to these rules, described
below.
Contract Date Calculated to Be 29th, 30th or 31st of Month
No Contracts will be given a Contract Date of the 29th, 30th or 31st of the
month. When values are applied to the new Contract from another contract and the
Contract Date would be calculated to be one of these dates, the Contract Date
will be the 28th of the month. In all other situations in which the Contract
Date would be calculated to be the 29th, 30th or 31st of the month, the Contract
Date will be set to the 1st of the next month.
Pre-Authorized Check Payment Plan (PAC) or Combined Billing (CB) -- Premium with
Application
If PAC or CB is requested and the initial premium is taken with the application,
the Contract Date will be the date of approval. Combined Billing is a billing
where multiple Kansas City Life contracts are billed together.
Government Allotment (GA) and Federal Allotment (FA)
If GA or FA is requested on the application and an initial premium is taken with
the application, the Contract Date will be the date of approval. If GA or FA is
requested and no initial premium is received the Contract Date will be the date
we receive a full monthly allotment.
Conversions
If a Kansas City Life term insurance product is converted to a new Contract the
Contract Date will be the date up to which the Premiums for the previous
contract were paid. If there is more than one term policy being converted, the
Contract Date will be determined by the contract with the earliest date up to
which Premiums were paid.
Kansas City Life may specify the form in which a premium payment must be made in
order for the premium to be in "good order." Ordinarily, a check will be deemed
to be in good order upon receipt, although Kansas City Life may require that the
check first be converted into federal funds. In addition, for a premium to be
received in "good order," it must be accompanied by all required supporting
documentation, in whatever form required.
An initial premium will not be accepted from applicants that are not eligible
for TIA coverage. Coverage under the Contract begins on the Contract Date, and
Kansas City Life will deduct Contract charges as of the Contract Date.
The Contract Date is determined by these guidelines except, as provided for
under state insurance law, the Owner may be permitted to backdate the Contract
to preserve insurance age (and receive a lower cost of insurance rate). In no
case may the Contract Date be more than six months prior to the date the
application was completed. Monthly Deductions will be charged from the Contract
Date. If coverage under an existing Kansas City Life insurance contract is being
replaced, that contract will be terminated and values will be transferred on the
date when all underwriting and other requirements have been met and the
application has been approved. (For a discussion of underwriting requirements,
see "Underwriting Requirements" below). Kansas City Life will deduct contract
charges as of the Contract Date.
4. Underwriting Requirements. Kansas City Life requires satisfactory evidence of
the proposed Insured's insurability, which may include a medical examination of
the proposed Insured. The available issue ages are 0 through 80 on a standard
non-tobacco user basis, 15 through 80 on a preferred non-tobacco user basis, and
15 through 80 on a tobacco user basis. Age is determined on the Contract Date
based on the Insured's age last birthday. The minimum Specified Amount is
$100,000 for issue ages 0 through 49. The minimum Specified Amount is $50,000
for issue ages 50 through 80. Acceptance of an application depends on Kansas
City Life's underwriting rules, and Kansas City Life reserves the right to
reject an application.
5. Determination of Owner of the Contract. The Owner of the Contract may
exercise all rights provided under the Contract. The Insured is the Owner,
unless a different Owner is named in the application. The Owner may by Written
Notice name a contingent Owner or a new Owner while the Insured is living.
Unless a contingent Owner has been named, on the death of the last surviving
Owner, ownership of the Contract passes to the estate of the last surviving
Owner, who will become the Owner if the Owner dies. The Owner may also be
changed prior to the Insured's death by Written Notice satisfactory to Kansas
City Life.
B. Payment and Acceptance of Additional Premiums
1. Generally. Additional unscheduled Premiums can be made at any time while the
Contract is in force. Kansas City Life has the right to limit the number and
amount of such Premiums and to require satisfactory evidence of insurability
prior to accepting unscheduled Premiums. A loan repayment must be clearly marked
as such or it will be credited as a premium. No premium payment will be accepted
after the Maturity Date.
2. Procedures for Accepting Additional Premiums. Premiums must be made by check
payable to Kansas City Life Insurance Company or by any other method that Kansas
City Life deems acceptable. Kansas City Life may specify the form in which a
premium payment must be made in order for the premium to be in "good order."
Ordinarily, a check will be deemed to be in good order upon receipt, although
Kansas City Life may require that the check first be converted into federal
funds. In addition, for a premium to be received in "good order," it must be
accompanied by all required supporting documentation, in whatever form required.
Total Premiums paid may not exceed premium limitations for life insurance set
forth in the Internal Revenue Code. Kansas City Life will monitor Contracts and
will notify the Owner if a premium payment exceeds this limit and will cause the
Contract to violate the definition of insurance. The owner may choose to take a
refund of the portion of the premium payment that is determined to be in excess
of applicable limitations, or the Owner may submit an application to modify the
Contract so it continues to qualify as a contract for life insurance. Modifying
the Contract may require evidence of insurability. (See "Underwriting
Requirements" above.) Kansas City Life will monitor Contracts and will attempt
to notify the Owner on a timely basis if Premiums paid under a Contract exceed
the "7-Pay Test" as set forth in the Internal Revenue Code and, therefore, the
Contract is in jeopardy of becoming a modified endowment contract.
3. Planned Premiums. When applying for a Contract, the Owner selects a plan for
paying level Premiums at specified intervals, e.g., monthly, quarterly,
semi-annually or annually. If the Owner elects, Kansas City Life will also
arrange for payment of Planned Premiums on a monthly or quarterly basis under a
pre-authorized payment arrangement. The Owner is not required to pay Premiums in
accordance with these plans; rather, the Owner can pay more or less than planned
or skip a Planned Premium Payment entirely. Each premium after the initial
premium must be at least $25. Kansas City Life may increase this minimum limit
90 days after sending the Owner a Written Notice of such increase. Subject to
the limits described above, the Owner can change the amount and frequency of
Planned Premiums by sending Written Notice to the Home Office. Kansas City Life,
however, reserves the right to limit the amount of a premium payment or the
total Premiums paid, as discussed above.
4. Guaranteed Payment Period and Guaranteed Monthly Premium. A Guaranteed
Payment Period is the period during which Kansas City Life guarantees that the
Contract will not lapse if the amount of total Premiums paid is greater than or
equal to the sum of: (1) the accumulated Guaranteed Monthly Premiums in effect
on each prior Monthly Anniversary Day, and (2) an amount equal to the sum of any
partial surrenders taken and the Loan balance under the Contract. The Guaranteed
Payment Periods are five years following the Contract Date and five years
following the effective date of an increase in the Specified Amount.
The Guaranteed Monthly Premium is shown in the Contract. The per $1,000
Guaranteed Monthly Premium factors for the Specified Amount vary by risk class,
issue age, and sex. Additional Premiums for substandard ratings and supplemental
and/or rider benefits are included in the Guaranteed Monthly Premium. However,
upon a change to the Contract, Kansas City Life will recalculate the Guaranteed
Monthly Premium and will notify the Owner of the new Guaranteed Monthly Premium
and amend the Owner's Contract to reflect the change.
5. Premiums Upon Increase in Specified Amount. After an increase in the
Specified Amount, Kansas City Life will calculate a new Guaranteed Monthly
Premium and the and the amount will apply for the remainder of the Guaranteed
Payment Period. The Owner will be notified of the new Guaranteed Monthly Premium
for this period. If an increase is made after the initial five Contract Years,
there will be no Guaranteed Payment Period applicable. Depending on the Contract
Value at the time of an increase in the Specified Amount and the amount of the
increase requested, an additional premium payment may be necessary or a change
in the amount of Planned Premiums may be advisable.
6. Premiums to Prevent Lapse. Failure to pay Planned Premiums will not
necessarily cause a Contract to lapse. Conversely, paying all Planned Premiums
will not guarantee that a Contract will not lapse. The conditions that will
result in the Owner's Contract lapsing will vary, as follows, depending on
whether a Guaranteed Payment Period is in effect.
a. During the Guaranteed Payment Period. A grace period starts if on any Monthly
Anniversary Day the Cash Surrender Value is less than the amount of the Monthly
Deduction and the accumulated Premiums paid as of the Monthly Anniversary Day
are less than required to guarantee the Contract will not lapse during the
Guaranteed Payment Period. The premium required to keep the Contract in force
will be an amount equal to the lesser of: (1) the amount to guarantee the
Contract will not lapse during the Guaranteed Payment Period less the
accumulated Premiums paid; and (2) an amount sufficient to provide a cash
surrender value equal to three Monthly Deductions.
b. After the Guaranteed Payment Period. A grace period starts if the Cash
Surrender Value on a Monthly Anniversary Day will not cover the Monthly
Deduction. A premium sufficient to provide a cash surrender value equal to three
Monthly Deductions must be paid during the grace period to keep the Contract in
force.
7. Grace Period. The grace period is a 61-day period to make a premium payment
sufficient to prevent lapse. Kansas City Life will send notice of the amount
required to be paid during the grace period to the Owner's last known address
and the address of any assignee of record. The grace period will begin when the
notice is sent. The Owner's Contract will remain in force during the grace
period. If the Insured should die during the grace period, the Death Benefit
proceeds will still be payable to the Beneficiary, although the amount paid will
reflect a reduction for the Monthly Deductions due on or before the date of the
Insured's death (and for any Loan Balance). If the grace period premium payment
has not been paid before the grace period ends, the Owner's Contract will lapse.
It will have no value and no benefits will be payable. A grace period also may
begin if the Loan Balance becomes excessive.
C. Allocation and Crediting of Initial and Additional Premiums
1. The Separate Account, Subaccounts, and Fixed Account. The variable benefits
under the Contracts are supported by the Kansas City Life Variable Life Separate
Account (the "Variable Account"). The Variable Account currently consists of 30
Subaccounts, the assets of which are used to purchase shares of a designated
corresponding mutual fund Portfolio that is part of one of the following Funds:
MFS Variable Insurance Trust ("MFS Trust"), American Century Variable Portfolios
Inc. ("American Century Variable Portfolios"), Federated Insurance Series,
Federated Global Investment Management Corp., Dreyfus Variable Investment Fund,
Dreyfus Stock Index Fund, The Dreyfus Socially Responsible Growth Fund, Inc.,
J.P. Morgan Series Trust II, Franklin Templeton Variable Insurance Products
Trust, Calamos Advisors Trust, AIM Variable Insurance Fund and Seligman
Portfolios, Inc. Each Fund is registered under the Investment Company Act of
1940 as an open-end management investment company. Owners also may allocate
Contract Value to Kansas City Life's general account (the "Fixed Account").
Additional Subaccounts may be added from time to time to invest in portfolios of
MFS Trust, American Century Variable Portfolios, Federated Insurance Series,
Federated Global Investment Management Corp., Dreyfus Variable Investment Fund,
Dreyfus Stock Index Fund, The Dreyfus Socially Responsible Growth Fund, Inc,
J.P. Morgan Series Trust II, Templeton Variable Insurance Products Trust,
Calamos Advisors Trust, AIM Variable Insurance Fund and Seligman Portfolios,
Inc. or any other investment company.
2. Allocations Among the Accounts. Net Premiums and Contract Value are allocated
to the Subaccounts and the Fixed Account in accordance with the following
procedures.
a. General. In the Contract application, the Owner specifies the percentage of a
Net Premium to be allocated to each Subaccount and to the Fixed Account. The sum
of the allocations must equal 100%, and Kansas City Life reserves the right to
limit the number of Subaccounts to which Premiums may be allocated. The number
will never be limited to less than 15, The Owner can change the allocation
percentages at any time, subject to these rules, by sending Written Notice to
the Home Office. The change will apply to Premiums received with or after
receipt of that Written Notice.
b. Allocation of Initial Premium. On the Allocation Date, the initial Net
Premium will be allocated to the Money Market Subaccount. The Allocation Date is
the later of the date when all underwriting and other requirements have been met
and an application has been approved, or the date the initial premium is
received in good order at the Home Office. Kansas City Life may specify the form
in which a premium payment must be made in order for the premium to be in "good
order." Ordinarily, a check will be deemed to be in good order upon receipt,
although Kansas City Life may require that the check first be converted into
federal funds. In addition, for a premium to be received in "good order," it
must be accompanied by all required supporting documentation, in whatever form
required. If any additional Premiums are received in good order before the
Reallocation Date (as defined below), the corresponding Net Premiums also will
be allocated to the Money Market Subaccount. The "free-look" period under the
Contract is assumed to end on the Reallocation Date, and on that date, Contract
Value in the Money Market Subaccount will be allocated to the Subaccounts and to
the Fixed Account based on the Net Premium allocation percentages specified in
the application. The Reallocation Date is 30 days after the Allocation Date.
c. Allocation of Additional Premiums. Premiums received on or after the
Reallocation Date will be credited to the Contract and the Net Premiums will be
invested as requested on the Valuation Day they are received at Kansas City
Life's Home Office, except if additional underwriting is required. Premiums
requiring additional underwriting will not be credited to the Contract until
underwriting has been completed and the premium payment has been accepted. (See
"Underwriting Requirements" above). If the additional premium payment is
rejected, Kansas City Life will return the premium payment immediately, without
any adjustment for investment experience.
II. Transfers Among Accounts
A. Transfer Privilege
1. General. After the Reallocation Date and prior to the Maturity Date, the
Owner may transfer all or part of an amount in the Subaccount(s) to another
Subaccount(s) or to the Fixed Account, or transfer a part of an amount in the
Fixed Account to the Subaccount(s), subject to the restrictions described below.
Kansas City Life will make the transfer on the date that it receives Written
Notice requesting such transfer.
2. General Restrictions on Transfer Privilege. The minimum transfer amount is
the lesser of $250 or the entire amount in that Subaccount or the Fixed Account.
A transfer request that would reduce the amount in a Subaccount or the Fixed
Account below $250 will be treated as a transfer request for the entire amount
in that Subaccount or the Fixed Account. There is no limit on the number of
transfers that can be made among Subaccounts or to the Fixed Account. However,
only one transfer may be made from the Fixed Account each Contract Year. (For a
description of those restrictions, see "Restrictions on Transfers from Fixed
Account," below.) The first six transfers during each Contract Year are free.
Any unused free transfers do not carry over to the next Contract Year. Kansas
City Life will assess a $25 Transfer Processing Fee for the seventh and each
subsequent transfer during a Contract Year. For the purpose of assessing the
fee, each Written Request (or telephone request described below) is considered
to be one transfer, regardless of the number of Subaccounts or the Fixed Account
affected by the transfer. The processing fee will be deducted from the amount
being transferred or from the remaining Contract Value, according to the Owner's
instructions.
An excessive number of transfers, including short-term "market timing"
transfers, may adversely affect the performance of the underlying Fund in which
a Subaccount invests. If, in our sole opinion, a pattern of excessive transfers
develops, we reserve the right not to process a transfer request. We also
reserve the right not to process a transfer request when the sale or purchase of
shares of a Fund is not reasonably practicable due to actions taken or
limitations imposed by the Fund.
3. Restrictions on Transfers from Fixed Account. One transfer each Contract Year
is allowed from the Fixed Account to any or all of the Subaccounts. The amount
transferred from the Fixed Account may not exceed 25% of the unloaned Fixed
Account Value on the date of transfer, unless the balance after the transfer is
less than $250, in which case Kansas City Life will transfer the entire amount.
B. Telephone Authorizations
1. Election of the Program. Transfers, changes in premium allocation, changes in
dollar cost averaging, changes in portfolio rebalancing and loan requests will
be based upon instructions given by telephone, provided the appropriate election
has been made at the time of application or proper authorization has been
provided to Kansas City Life. Kansas City Life reserves the right to suspend
telephone transfer, premium allocation and/or loan privileges at any time, for
any reason, if it deems such suspension to be in the best interests of Contract
Owners.
2. Procedures Employed to Confirm Genuineness of Telephone Transfer, Premium
Allocation Changes and Loan Privileges Instructions. Kansas City Life will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, and if Kansas City Life follows those procedures it will
not be liable for any losses due to unauthorized or fraudulent instructions.
Kansas City Life may be liable for such losses if it does not follow those
reasonable procedures. The procedures Kansas City Life will follow for telephone
transfers, premium allocation changes and loans include requiring some form of
personal identification prior to acting on instructions received by telephone,
providing written confirmation of the transaction, and making a tape recording
of the instructions given by telephone.
C. Dollar Cost Averaging Plan
1. General. The Dollar Cost Averaging Plan, if elected, enables the Owner to
transfer systematically and automatically, on a monthly basis for a period of 3
to 36 months, specified dollar amounts from the Money Market Subaccount to other
Subaccounts. At least $250 must be transferred from the Money Market Subaccount
each month. The required amounts may be allocated to the Money Market Subaccount
through initial or subsequent Premiums or by transferring amounts into the Money
Market Subaccount from the other Subaccounts or from the Fixed Account (which
may be subject to certain restrictions).
2. Election and Operation of the Program. The Owner may elect this plan at the
time of application by completing the authorization on the application or at any
time after the Contract is issued by properly completing the election form and
returning it to Kansas City Life. The election form allows the Owner to specify
the number of months for the Dollar Cost Averaging Plan to be in effect. Changes
may be made in dollar cost averaging by telephone if proper authorization has
been provided. Dollar cost averaging transfers will commence on the next Monthly
Anniversary Day on or next following the Reallocation Date or the date The Owner
requests. Dollar cost averaging will terminate at the completion of the
designated number of months, when the value of the Federated Prime Money Fund II
Subaccount is completely depleted, or the day Kansas City Life receives Written
Notice instructing Kansas City Life to cancel the Dollar Cost Averaging Plan.
Transfers made from the Money Market Subaccount for the Dollar Cost Averaging
Plan will not count toward the six transfers permitted each Contract Year
without imposing the Transfer Processing Fee.
D. Portfolio Rebalancing Plan
1. General. The Owner may elect to have the accumulated balance of each
Subaccount redistributed to equal a specified percentage of the Variable Account
Value. This will be done on a quarterly basis at three-month intervals from the
Monthly Anniversary Day on which the Portfolio Rebalancing Plan commences.
2. Election and Operation of the Plan. If elected, this plan automatically
adjusts the Owner's Portfolio mix to be consistent with the allocation most
recently requested. The redistribution will not count toward the six transfers
permitted each Contract Year without imposing the Transfer Processing Fee.
Changes may be made in the Portfolio Rebalancing Plan if proper authorization
has been provided. If the Dollar Cost Averaging Plan has been elected and has
not been completed, the Portfolio Rebalancing Plan will commence on the Monthly
Anniversary Day following the termination of the Dollar Cost Averaging Plan. If
the Contract Value is negative at the time portfolio rebalancing is scheduled,
the re-distribution will not be completed.
Portfolio rebalancing will terminate when the Owner requests any transfer unless
the Owner authorizes a change in allocation at that time or the day Kansas City
Life receives written notice instructing Kansas City Life to cancel the plan.
III. "Redemption" Procedures: Full and Partial Surrenders, Maturity Benefit,
Death Benefits, and Loans
A. "Free-Look" Period
The Owner may cancel the Contract for a refund during the "free-look" period.
This period expires 10 days after the Owner receives the Contract. If the Owner
decides to cancel the Contract, the Owner must return it by mail or other
delivery method to the Home Office or to the authorized Kansas City Life agent
who sold it. Immediately after mailing or delivery, the Contract will be deemed
void from the beginning. Within seven calendar days after Kansas City Life
receives the returned Contract, Kansas City Life will refund Premiums paid. In
some states we may be required to refund the greater of Contract Value and
Premiums paid.
In addition, the Owner may cancel an increase in Specified Amount that the Owner
has requested within 10 days after the Owner receives the adjusted Contract. The
Specified Amount increase will be canceled from its beginning and any charges
attributable to the increase will be returned to Contract Value.
B. Surrendering the Contract for Cash Surrender Value
The Owner may surrender the Contract at any time for its Cash Surrender Value by
submitting a Written Request to the Home Office. Kansas City Life may require
return of the Contract. A Surrender Charge may apply. A surrender request will
be processed as of the date the Owner's Written Request and all required
documents are received. Payment will generally be made within seven calendar
days. The Cash Surrender Value may be taken in one lump sum or it may be applied
to a payment option. The Owner's Contract will terminate and cease to be in
force if it is surrendered for one lump sum. It cannot later be reinstated.
C. Partial Surrenders
1. General. The Owner may make partial surrenders under the contract at any
time, subject to the conditions below. The Owner must submit a Written Request
to the Home Office. Each partial surrender must be at least $500. The partial
surrender amount may not exceed the Cash Surrender Value, less $300. A Partial
Surrender Fee will be assessed on a partial surrender. This charge will be
deducted from the Owner's Contract Value along with the amount requested to be
surrendered and will be considered part of the surrender (together, "partial
surrender amount"). As of the date Kansas City Life receives a Written Request
for a partial surrender, the Contract Value will be reduced by the partial
surrender amount.
2. Allocation of Partial Surrender Among the Accounts. When the Owner requests a
partial surrender, the Owner can direct how the partial surrender amount will be
deducted from Contract Value in the Subaccounts and Fixed Account. If the Owner
provides no directions, the partial surrender amount will be deducted from
Contract Value in the Subaccounts and Fixed Account on a pro-rata basis.
3. Effect of Partial Surrender on Death Benefit. If Coverage Option A is in
effect, Kansas City Life will reduce the Specified Amount by an amount equal to
the partial surrender amount, less the excess, if any, of the Death Benefit over
the Specified Amount at the time the partial surrender is made. If the partial
surrender amount is less than the excess of the Death Benefit over the Specified
Amount, the Specified Amount will not be reduced. Kansas City Life reserves the
right to reject a partial surrender request if the partial surrender would
reduce the Specified Amount below the minimum amount for which the Contract
would be issued under Kansas City Life's then-current rules, or if the partial
surrender would cause the Contract to fail to qualify as a life insurance
contract under applicable tax laws, as interpreted by Kansas City Life.
4. Date Partial Surrender Requests Are Processed. Partial surrender requests
will be processed as of the date the Owner's Written Request is received in good
order, and generally will be paid within seven calendar days. A Written Request
for a partial surrender will be deemed to be good order when, among other
things, all required supporting documentation has been received.
D. Surrender Charge
During the first fifteen Contact Years, a Surrender Charge will be deducted from
the Contract Value if the Contract is completely surrendered or lapses or the
Specified Amount is reduced (including when a partial surrender reduces the
Specified Amount). The Surrender Charge is based on the Specified Amount at
issue. We calculate this charge by multiplying the Surrender Charge factor for
the applicable age, sex and risk class by the Surrender Charge percentages for
the Insured's issue age and then by the Specified Amount, divided by $1,000. The
total Surrender Charge will not exceed the maximum Surrender Charge set forth in
the Contract. An additional Surrender Charge and Surrender Charge period will
apply to each portion of the Contract resulting from a Specified Amount
increase, starting with the effective date of the increase.
Any Surrender Charge deducted upon lapse is credited back to the Contract Value
upon reinstatement. The Surrender Charge on the date of reinstatement will be
the same as it was on the date of lapse. For purposes of determining the
Surrender Charge on any date after reinstatement, the period the Contract was
lapsed will not count.
The Surrender Charges calculated are applicable at the end of each Contract
Year. After the first Contract Year, we will pro rate the surrender charges
between Contract Years. However, after the end of the 15th Contract Year, there
will be no Surrender Charge.
E. Partial Surrender Fee Kansas City Life will deduct an administrative charge
upon a partial surrender. This charge is the lesser of 2% of the amount
surrendered or $25. This charge will be deducted from the Contract Value in
addition to the amount requested to be surrendered and will be considered to be
part of the partial surrender amount.
E. Redemptions for Monthly Deduction
On the Allocation Date, Kansas City Life will deduct Monthly Deductions for the
Contract Date and each Monthly Anniversary that have occurred prior to the
Allocation Date. (The Monthly Deduction is described in Appendix A.) Subsequent
Monthly Deductions will be made as of each Monthly Anniversary Day thereafter.
The Owner's Contract Date is the date used to determine the Owner's Monthly
Anniversary Day. The Monthly Deduction consists of (1) cost of insurance
charges, (2) administration fees, and (3) any charges for supplemental and/or
rider benefits. The Monthly Deduction is deducted from the Variable Accounts and
Fixed Account pro rata on the basis of the portion of Contract Value in each
account on the Monthly Anniversary Day.
G. Death Benefits
As long as the Contract remains in force, Kansas City Life will pay the Death
Benefit proceeds upon receipt at the Home Office of proof of the Insured's death
that Kansas City Life deems satisfactory. Kansas City Life may require return of
the Contract. The Death Benefit will be paid in a lump sum generally within
seven calendar days of receipt of satisfactory proof or, if elected, under a
payment option. The Death Benefit will be paid to the Beneficiary.
As described below, Kansas City Life will pay Death Benefit proceeds through
Kansas City Life's Personal Growth Account. Kansas City Life places proceeds to
be paid through the Personal Growth Account in their general account. The
Personal Growth Account pays interest and provides check-writing privileges
under which Kansas City Life reimburses the bank that pays the check out of the
proceeds held in their general account. A Contract Owner or beneficiary
(whichever applicable) has immediate and full access to Proceeds by writing a
check on the account. Kansas City Life pays 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.
Kansas City Life 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 Kansas City Life's
approval.
1. Amount of Death Benefit Proceeds. The Death Benefit proceeds are equal to the
sum of the Death Benefit under the Coverage Option selected calculated on the
date of the Insured's death, plus any supplemental and/or rider benefits, plus
any cost of insurance charges deducted beyond the date of death, minus any Loan
Balance on that date and, if the date of death occurred during a grace period,
minus any past due Monthly Deductions. Under certain circumstances, including
without limitation when the age or sex of the Insured has been misstated or when
the Insured dies by suicide within two years of the Contract Date or within two
years after the effective date of any increase in the Specified Amount, the
amount of the Death Benefit may be further adjusted. If part or all of the Death
Benefit is paid in one sum, Kansas City Life will pay interest on this sum as
required by applicable state law from the date of receipt of due proof of the
Insured's death to the date of payment.
2. Coverage Options. The Contract Owner may choose one of three Coverage
Options, which will be used to determine the Death Benefit. Under Option A, the
Death Benefit is the greater of the Specified Amount or the Applicable
Percentage (as described below) of Contract Value on the date of the Insured's
death. Under Option B, the Death Benefit is the greater of the Specified Amount
plus the Contract Value on the date of death, or the Applicable Percentage of
the Contract Value on the date of the Insured's death. Under Option C, the Death
Benefit is the greater of the Specified Amount plus total Premiums paid on the
date of death minus any partial surrenders (including surrender charges) made,
or the Applicable Percentage of the Contract Value on the date of the Insured's
death.
If investment performance is favorable, the amount of the Death Benefit may
increase. However, under Option A, the Death Benefit ordinarily will not change
for several years to reflect any favorable investment performance and may not
change at all. Under Option B, the Death Benefit will vary directly with the
investment performance of the Contract Value.
The "Applicable Percentage" is 250% when the Insured has attained Age 40 or
less, and decreases each year thereafter to 100% when the Insured has attained
Age 95.
3. Initial Specified Amount and Coverage Option. The Initial Specified Amount is
set at the time the Contract is issued. The Owner may change the Specified
Amount from time to time, as discussed below. The Owner selects the Coverage
Option when the Owner applies for the Contract. The Owner also may change the
Coverage Option, as discussed below.
4. Changes in Coverage Option. We reserve the right to require that the Contract
be in force for one Contract Year before any change in Coverage Option and that
no more than one change in Coverage Option be made in any 12-month period.
However, Option C is only available at issue. On or after the first Contract
Anniversary, the Owner may change the Coverage Option on the Contract subject to
the following rules. After the Coverage Option has been changed, it cannot be
changed again for the next twelve Contract Months. After any change, the
Specified Amount must be at least $100,000 for issue Ages 0-49 and $50,000 for
issue Ages 50-80. The effective date of the change will be the Monthly
Anniversary Day that coincides with or next follows the day that Kansas City
Life receives and accepts the request. Kansas City Life may require satisfactory
evidence of insurability. (See "Underwriting requirements," above.)
When a change from Option A or Option C to Option B is made, the Specified
Amount after the change is effective will be equal to the Specified Amount
before the change. The Death Benefit will increase by the Contract Value on the
effective date of the change. When a change from Option B or Option C to Option
A is made, the Specified Amount after the change will be equal to the Death
Benefit as of the effective date of the change.
5. Ability to Adjust Specified Amount. We reserve the right to require that the
Contract be in force for one Contract Year before a change in Specified Amount
and we reserve the right to only allow one change in Specified Amount every
twelve Contract months. If a change in the Specified Amount would result in
total Premiums paid exceeding the premium limitations prescribed under current
tax law to qualify the Contract as a life insurance contract, Kansas City Life
will refund, after the next Monthly Anniversary, to the Owner the amount of such
excess above the premium limitations.
Kansas City Life reserves the right to decline a requested decrease in the
Specified Amount if compliance with the guideline premium limitations under
current tax law resulting from this decrease would result in immediate
termination of the Contract, or if to effect the requested decrease, payments to
the Owner would have to be made from the Contract Value for compliance with the
guideline premium limitations, and the amount of such payments would exceed the
Cash Surrender Value under the Contract.
The Specified Amount after any decrease must be at least $100,000 for Contracts
that were issued at issue Ages 0-49 and $50,000 for Contracts that were issued
at issue Ages 50-80. A decrease in Specified Amount will become effective on the
Monthly Anniversary Day that coincides with or next follows receipt and
acceptance of a request at the Home Office.
Any increase in the Specified Amount must be at least $25,000 and an application
must be submitted. Kansas City Life reserves the right to require satisfactory
evidence of insurability. In addition, the Insured's attained Age must be less
than the current maximum issue Age for the Contracts, as determined by Kansas
City Life from time to time.
The increase in Specified Amount will become effective on the Monthly
Anniversary Day on or next following the date the request for the increase is
received and approved. If a Guaranteed Payment Period is in effect, the
Contract's Guaranteed Monthly Premium amount will also generally be increased.
The new Guaranteed Monthly Premium will apply for the remainder of the
Guaranteed Payment Period. If an increase is made after the first five Contract
Years, no Guaranteed Payment Period will apply. An increase in Specified Amount
may be cancelled by the Owner in accordance with the Contract's "free look"
provisions. In such case, the amount refunded will be limited to those charges
that are attributable to the increase.
A new Surrender Charge and Surrender Charge period will apply to each portion of
the Contract resulting from an increase in Specified Amount, starting with the
effective date of the increase.
H. Loans
1. When Loans are Permitted. Prior to the death of the Insured, the Owner may
borrow against the Contract at any time by submitting a Written Request to the
Home Office, provided that the Cash Surrender Value of the Contract is greater
than zero. Loans may also be made by telephone if the appropriate election has
been made at the time of application or proper authorization has been provided.
The maximum loan amount is equal to the Contract's Cash Surrender Value on the
effective date of the loan less loan interest to the next Contract Anniversary.
Contract loans will be processed as of the date the Owner's Written Request is
received and approved. Loan proceeds generally will be sent to the Owner within
seven calendar days.
2. Interest. Kansas City Life will charge interest on any Loan Balance at an
annual rate of 6.0%. Interest is due and payable at the end of each Contract
Year while a loan is outstanding. If interest is not paid when due, the amount
of the interest is added to the loan and becomes part of the Loan Balance.
3. Loan Collateral. When a Contract loan is made, an amount sufficient to secure
the loan is transferred out of the Subaccounts and the unloaned value in the
Fixed Account and into the Contract's Loan Account. Thus, a loan will have no
immediate effect on the Contract Value, but the Cash Surrender Value will be
reduced immediately by the amount transferred to the Loan Account. The Owner can
specify the Variable Accounts and/or Fixed Account from which collateral will be
transferred. If no allocation is specified, collateral will be transferred from
each Subaccount and from the unloaned value in the Fixed Account in the same
proportion that the Contract Value in each Subaccount and the unloaned value in
the Fixed Account bears to the total Contract Value in those accounts on the
date that the loan is made. An amount of Cash Surrender Value equal to any due
and unpaid loan interest will also be transferred to the Loan Account on each
Contract Anniversary. Due and unpaid interest will be transferred from each
Subaccount and the unloaned value in the Fixed Account in the same proportion
that each Subaccount Value and the unloaned value in the Fixed Account Value
bears to the total unloaned Contract Value.
The Loan Account will be credited with interest at an effective annual rate of
not less than 4%. Interest earned on the Loan Account will be added to the Fixed
Account.
4. Preferred Loan Provision. Beginning in the eleventh Contract Year, a
preferred loan may be made. The maximum amount available for a preferred loan is
the Contract Value less Premiums paid and may not exceed the maximum loan
amount. The amount in the Loan Account securing the preferred loan will be
credited with interest at an effective annual rate of 6.0%. The preferred loan
provision is not guaranteed.
5. Loan Repayment;. The Owner may repay all or part of the Owner's Loan Balance
at any time while the Insured is living and the Contract is in force. Each loan
repayment must be at least $50.00. Loan repayments must be sent to the Home
Office and will be credited as of the date received. A loan repayment must be
clearly marked as "loan repayment" or it will be credited as a premium. When a
loan repayment is made, Contract Value in the Loan Account in an amount equal to
the repayment is transferred from the Loan Account to the Subaccounts and the
unloaned value in the Fixed Account. Unless specified otherwise by the Owner,
loan repayment amounts will be transferred to the Subaccounts and the unloaned
value in the Fixed Account according to the premium allocation instructions in
effect at that time.
6. Reduction in Death Benefit. If the Death Benefit becomes payable while a loan
is outstanding, the Loan Balance will be deducted in calculating the Death
Benefit proceeds.
7. Default. If the Loan Account Value exceeds the Contract Value less any
applicable Surrender Charge on any Valuation Day, the Contract will be in
default. The Owner, and any assignee of record, will be sent notice of the
default. The Owner will have a 61-day grace period to submit a sufficient
payment to avoid termination of coverage under the Contract. The notice will
specify the amount that must be repaid to prevent termination.
I. Payment Options
The Contract offers a variety of ways of receiving proceeds payable under the
Contract, such as on surrender, death or maturity, other than in a lump sum.
These payment options are summarized below. The Owner may apply proceeds of
$2,000 or more which are payable under this Contract to any of the following
options:
1. Option 1 - Interest Payments. Kansas City Life will make interest payments to
the payee annually or monthly as elected. Interest on the proceeds will be paid
at the guaranteed rate of 3.0% per year and may be increased by additional
interest paid annually. The proceeds and any unpaid interest may be withdrawn in
full at any time.
2. Option 2 - Installments of a Specified Amount. Kansas City Life will make
annual or monthly payments until the proceeds plus interest are fully paid.
Interest on the proceeds will be paid at the guaranteed rate of 3.0% per year
and may be increased by additional interest. The present value of any unpaid
installments may be withdrawn at any time.
3. Option 3 - Installments For a Specified Period. Payment of the proceeds may
be made in equal annual or monthly payments for a specified number of years.
Interest on the proceeds will be paid at the guaranteed rate of 3.0% per year
and may be increased by additional interest. The present value of any unpaid
installments may be withdrawn at any time.
4. Option 4 - Life Income. Kansas City Life will pay an income during the
payee's lifetime. A minimum guaranteed payment period may be chosen which
guarantees continued payments for the minimum amount of time selected, even if
the payee dies before the guaranteed number of payments is made. Payments
received under the Installment Refund Option will continue until the total
income payments received equal the proceeds applied.
5. Option 5 - Joint and Survivor Income. Kansas City Life will pay an income
during the lifetime of two persons and will continue to pay the same income as
long as either person is living. The minimum guaranteed payment period will be
ten years.
6. Minimum Amounts. Kansas City Life reserves the right to pay the total amount
of the Contract in one lump sum, if less than $2000. If payments are less than
$50, payments may be made less frequently at Kansas City Life's option. If
Kansas City Life has available at the time a payment option is elected options
or rates on a more favorable basis than those guaranteed, the more favorable
benefits will apply.
J. Delay in Redemptions or Transfers Kansas City Life will ordinarily pay any
Death Benefit proceeds, loan proceeds, partial surrender proceeds, or full
surrender proceeds within seven calendar days after receipt at the Home Office
of all the documents required for such a payment. Other than the Death Benefit,
which is determined as of the date of death, the amount will be determined as of
the date of receipt of required documents. However, Kansas City Life may delay
making a payment or processing a transfer request if (1) the New York Stock
Exchange is closed for other than a regular holiday or weekend, trading is
restricted by the SEC, or the SEC declares that an emergency exists as a result
of which the disposal or valuation of Variable Account assets is not reasonably
practicable; or (2) the SEC by order permits postponement of payment to protect
Kansas City Life's Contract Owners.
K.. Maturity Benefit The Maturity Date is the Contract Anniversary an or next
following the Insured's 95th birthday. If the Contract is still in force on the
Maturity Date, the Maturity Benefit will be paid to you. The Maturity Benefit is
equal to the Cash Surrender Value on the Maturity Date.
APPENDIX A
On the Allocation Date, Kansas City Life will deduct Monthly Deductions for the
Contract Date and each Monthly Anniversary Day that have occurred prior to the
Allocation Date. Subsequent Monthly Deductions will be made as of each Monthly
Anniversary Day thereafter. The Contract Date is the date used to determine the
Monthly Anniversary Day. The Monthly Deduction consists of (1) cost of insurance
charges, (2) administration fees (the "Monthly Expense Charge"), and (3) any
charges for supplemental and/or rider benefits. The Monthly Deduction is
deducted from the Variable Accounts and Fixed Account pro rata on the basis of
the portion of Contract Value in each account on the Monthly Anniversary Day.
Cost of Insurance Charge. This charge compensates Kansas City Life for the
expense of providing insurance coverage. Kansas City Life may make a profit from
this charge. Any profit may be used to finance distribution expenses. The charge
depends on a number of variables and therefore will vary from Contract to
Contract and from Monthly Anniversary Day to Monthly Anniversary Day. For any
Contract, the cost of insurance on a Monthly Anniversary Day is calculated by
multiplying the current cost of insurance rate for the Insured by the net amount
at risk on that Monthly Anniversary Day.
The net amount at risk on a Monthly Anniversary Day is the difference between
the Death Benefit, discounted with one month of interest and the Contract Value,
as calculated on that Monthly Anniversary Day before the cost of insurance
charge is taken. The interest rate used to discount the Death Benefit is the
current interest rate that is being credited on portions of any Net Premiums
that are allocated to the Fixed Account as of that Monthly Anniversary Day.
The cost of insurance rate for a Contract on a Monthly Anniversary Day is based
on the Insured's Age at issue, sex, level of specified amount, number of
completed Contract Years, and risk class, and therefore varies from time to
time. Kansas City Life currently places Insureds in the following classes, based
on underwriting: Standard Tobacco User, Preferred Tobacco User, Standard
Non-tobacco User, or Preferred Non-tobacco User. An Insured may be placed in a
substandard risk class, which involves a higher mortality risk than the Standard
Tobacco User or Standard Non-tobacco User classes. Standard Non-tobacco User
rates are available for Issue Ages 0-80. Standard Tobacco User and Preferred
Non-tobacco User rates are available for Issue Ages 15-80. Contracts with a
specified amount of $500,000 and above currently are subject to a lower level of
cost of insurance charges.
The cost of insurance rate for an increase in Specified Amount will be
determined on each Monthly Anniversary Day and is based on the Insured's Age,
sex, number of completed Contract Years, and risk class.
Kansas City Life places the Insured in a risk class when the Contract is given
underwriting approval, based on Kansas City Life's underwriting of the
application. When an increase in Specified Amount is requested, Kansas City Life
conducts underwriting before approving the increase (except as noted below) to
determine the risk class that will apply to the increase. If the risk class for
the increase has lower cost of insurance rates than the existing risk class, the
lower rates will apply to the entire Specified Amount. If the risk class for the
increase has higher cost of insurance rates than the existing class, the higher
rates will apply only to the increase in Specified Amount, and the existing risk
class will continue to apply to the existing Specified Amount.
Kansas City Life does not conduct underwriting for an increase in Specified
Amount if the increase is requested as part of a conversion from a term contract
or on exercise of the Option to Increase the Specified Amount Rider. In the case
of a term conversion, the risk class that applies to the increase will be based
on the provisions of the term contract. In the case of an increase under the
Option to Increase Specified Amount Rider, the Insured's risk class for an
increase will be the class in effect on the initial Specified Amount at the time
that the increase is elected.
The net amount at risk associated with a Specified Amount increase is determined
by the percentage that the Specified Amount increase bears to the Contract's
total Specified Amount immediately following the increase. The resulting
percentage is the part of the Contract's total net amount at risk that is
attributed to the Specified Amount increase. The remaining percentage of the
Contract's total net amount at risk is attributed to the existing Specified
Amount. (For example, if the Contract's Specified Amount is increased by
$100,000 and the total Specified Amount is $250,000, then 40% of the total net
amount at risk is attributed to the Specified Amount increase.) On each Monthly
Anniversary Day, the net amount at risk used to determine the cost of insurance
charge associated with the Specified Amount increase is the Contract's total net
amount of risk at that time, multiplied by the percentage calculated as
described above. This percentage remains fixed until the Specified Amount is
changed.
Kansas City Life guarantees that the cost of insurance rates used to calculate
the monthly cost of insurance charge will not exceed the maximum cost of
insurance rates set forth in the contracts. The guaranteed rates for standard
and preferred classes are based on the 1980 Commissioners' Standard Ordinary
Mortality Tables, Male or Female, Smoker or Nonsmoker Mortality Rates ("1980 CSO
Tables"). The guaranteed rates for substandard classes are based on multiples of
or additives to the 1980 CSO Tables.
Kansas City Life's current cost of insurance rates may be less than the
guaranteed rates that are set forth in the Contract. Current cost of insurance
rates will be determined based on Kansas City Life's expectations as to future
mortality experience. These rates may change from time to time.
Kansas City Life may make a profit from this charge. Any profit may be used to
finance distribution expenses.
Monthly Expense Charge. Kansas City Life will begin deducting the Monthly
Expense Charge from the Contract Value as of the Contract Date. Thereafter,
Kansas City Life will deduct a Monthly Expense Charge from the Contract Value as
of each Monthly Anniversary Day. The Monthly Expense Charge is made up of two
parts:
(1) a maintenance charge which is a level monthly charge which applies in all
years. The maintenance charge is $7.50 per month and is guaranteed.
(2) a per thousand charge which is guaranteed never to exceed $.05 per thousand
of Specified Amount per month. Kansas City Life is currently not charging the
per thousand portion of the Monthly Expense Charge.
The Monthly Expense Charge reimburses Kansas City Life for expenses incurred in
the administration of the Contracts and the Variable Account. Such expenses
include but are not limited to: underwriting and issuing the Contract,
confirmations, annual reports and account statements, maintenance of Contract
records, maintenance of Variable Account records, administrative personnel
costs, mailing costs, data processing costs, legal fees, accounting fees, filing
fees, the costs of other services necessary for Contract Owner servicing and all
accounting, valuation, regulatory and updating requirements.
Reduced Charges for Eligible Groups
The charges otherwise applicable may be reduced with respect to Contracts issued
to a class of associated individuals or to a trustee, employer or similar entity
where Kansas City Life anticipates that the sales to the members of the class
will result in lower than normal sales or administrative expenses. These
reductions will be made in accordance with our rules in effect at the time of
the application for a Contract. The factors we will consider in determining the
eligibility of a particular group for reduced charges and the level of the
reduction are as follows: the nature of the association and it organizational
framework, the method by which sales will be made to the members of the class,
the facility with which Premiums will be collected from the associated
individuals and the association capabilities with respect to administrative
tasks, the anticipated persistency of the Contract, the size of the class of
associated individuals and the number of years it has been in existence and any
other such circumstances which justify a reduction in sales or administrative
expenses. Any reduction will be reasonable and will apply uniformly to all
prospective Contract purchases in the class and will not be unfairly
discriminatory to the interest of any Contract holder.
Supplemental and/or Rider Benefits
The following supplemental and/or rider benefits are available and may be added
to the Owner's Contract. Monthly charges for these benefits and/or riders will
be deducted from the Owner's Contract Value as part of the Monthly Deduction.
All of these riders may not be available in all states.
Guaranteed Minimum Death Benefit Rider (GMDB)
Issue Ages: Same as Contract; only available at issue
This rider guarantees the payment of the Death Benefit Proceeds at the
death of the Insured, regardless of the investment performance of the
Subaccounts. In order for this guarantee to apply, this rider must be still
be in effect and the cumulative Guaranteed Minimum Death Benefit Rider
requirement must be met.
There is no charge for this rider, but it must be requested at issue of the
Contract.
The Guaranteed Minimum Death Benefit Premium is the monthly Premium level
which guarantees that the Guaranteed Minimum Death Benefit Rider will
remain in effect. The cumulative Guaranteed Minimum Death Benefit Rider
Premium requirement must be met for this guarantee to remain in effect.
This requirement is met if the cumulative paid Premiums equal or exceed the
cumulative Guaranteed Minimum Death Benefit Rider Premium requirement plus
any Loan Balance on each Monthly Anniversary Day. The cumulative paid
Premium is an amount equal to Premiums paid less partial surrenders each
accumulated at the guaranteed interest rate applicable to the Fixed
Account, to the date the cumulative Guaranteed Minimum Death Benefit Rider
Premium requirement is tested.
This benefit will only guarantee that the Contract Death Benefit will
remain in force. This benefit does not guarantee that any other rider
benefits will remain in force. All other Contract riders terminate at the
point the Contract would have terminated in the absence of this Guaranteed
Minimum Death Benefit Rider.
If the Contract includes any riders and the Cash Surrender Value is less
than or equal to zero after the Guaranteed Payment Period, you have the
following options:
1. terminate any other riders attached to this Contract and keep the
Death Benefit in force under the terms of this Guaranteed Minimum
Death Benefit Rider; or
2. pay sufficient Premiums to obtain a positive Cash Surrender Value
to avoid lapse of the Contract and any riders.
If one of the above options are not selected, we will terminate your
Contract and all riders.
If the cumulative Guaranteed Minimum Death Benefit Rider Premium
requirement is not met, the rider will be in default. We will send you
notice of the Premium required to maintain the rider. We will provide
a notice period of 61 days to pay the Premium and maintain the rider.
The period begins on the date that we mail the notice. The Premium in
default will be the amount by which the cumulative Guaranteed Minimum
Death Benefit Rider Premium requirement plus any Loan Balance is
greater that the cumulative paid Premium. If the cumulative Guaranteed
Minimum Death Benefit Rider Premium requirement is not met and is not
paid by the end of the notice period, this rider will terminate.
You may apply to have this rider reinstated within two years of
termination of such rider while the Contract is in force.
Reinstatement requires:
1. a Written Request to reinstate the rider;
2. evidence f insurability satisfactory to us, unless
reinstatement is request within one year after the beginning
of the notice period; and
3. payment of the amount by which the cumulative Guaranteed
Minimum Death Benefit Rider Premium plus any Loan Balance
exceeds the cumulative paid Premiums on the date of
reinstatement.
We have the right to deny reinstatement of the rider more than once
during the life of the Contract.
This benefit terminates on the earlier of:
1. the date the contract terminates for any reason;
2. the date you cancel this rider;
3. the Insured's Age 65; or
4. when the cumulative Guaranteed Minimum Death Benefit Rider
Premium requirement is not met subject to the notice period.
You may cancel this rider at any time. The cancellation will be
effective on the Monthly Anniversary Day on or next following the date
we receive your Written Request. We may require that the Contract be
submitted for endorsement to show the cancellation.
Disability Continuance of Insurance (DCOI)
Issue Ages: 15-55, renewal through age 59 This rider covers the
Contract's Monthly Deductions during the period of total disability of
the Insured. DCOI benefits become payable after the Insured's total
disability exists for six consecutive months and total disability
occurs before age 60. Benefits under this rider continue until the
Insured is no longer totally disabled.
Accidental Death Benefit (ADB)
Issue Ages: 0-60
This rider provides for the payment of an additional amount of
insurance in the event of accidental death. The rider terminates when
the Insured attains age 70.
Option to Increase Specified Amount (Assured Insurability - AI)
Issue Ages: 0-38
This rider allows the Specified Amount of the Contract to increase by
the option amount or less, without evidence of insurability on the
Insured. These increases may occur on regular option dates or
alternate option dates. See the rider contract for the specific dates.
Spouse's Term insurance (STI)
Issue Ages: 15-50 (Spouse's age)
This rider provides decreasing term insurance on the Insured's spouse.
The amount of insurance coverage is expressed in units and a maximum
number of five units may be purchased. The amount of insurance per
unit of coverage is based on the Insured Spouse's attained age. A
table specifying the amount of insurance per unit of coverage is in
the rider contract.
Children's Term Insurance (CTI)
Issue Ages: 14 Days - 17 Years (Children's ages)
This rider provides level term insurance on each Insured Child. This
term insurance continues until the Contract anniversary on which the
Insured Child's attained age is 25. The rider expires on the Contract
Anniversary on which the Insured is age 65.
Other Insured Term Insurance (OI)
Issue Ages: 0-65 (Other Insured's age)
This rider provides level yearly renewable term coverage on the
Insured, the Insured's spouse, and/or children. The coverage expires
at the earlier of the Contract Anniversary on which the Insured or the
Other Insured is age 95 unless an earlier date is requested. The term
insurance provided by this rider can be converted to a permanent
contract at any time the rider is in force without evidence of
insurability.
Additional Life Insurance Rider (ALI)
Issue Ages: 0-80
This rider provides level yearly renewable term coverage on the Insured,
which counts towards the Death Benefit corridor. The minimum issue limit is
$25,000. The maximum term insurance coverage, including Other Insured
coverage on the primary Insured, is five times the Specified Amount. This
term insurance may be converted to a new permanent contract at any time the
rider is in force without evidence of insurability. If the contract has
Accidental Death Benefit coverage, it is also available on this rider.
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.
Disability Premium Benefit Rider (DPB)
Issue Ages: 15-55, renewal through 59
This rider provides for the payment of the disability premium benefit
amount as premium to the Contract during a period of total disability
of the Insured. The DPB benefit amount is a monthly amount that is
requested by the Owner. DPB benefits become payable after the
Insured's total disability exists for six consecutive months and total
disability occurs before age 60. Benefits under this rider continue
until the Insured is no longer totally disabled.
Accelerated Death Benefit/Living Benefits Rider (LBR)
Issue Ages: No age limitations
This rider provides you the opportunity to receive an accelerated
payment of all or part of 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.
Under both options the Death Benefit and associated values will be
reduced at the time the benefit is initially calculated.
We can furnish you details about the amount of accelerated death
benefit available to you if you are eligible and the adjusted Premiums
that would be in effect if less than the entire death benefit is
accelerated.
When you request an acceleration of a portion of the Death Benefit
under this rider you may direct how we deduct the amount from your
Contract Value in the Subaccounts and Fixed Account. If you provide no
directions, we will deduct the payment amount from your Contract
/Values in the Subaccounts and Fixed Account on a pro rata basis. (See
"Minimum Guaranteed and Current Interest Rates," page 23.)
You are not eligible for this benefit if you are required by law or a
government agency to:
(1) exercise this option to satisfy the claims of creditors, or
(2) exercise this option in order to apply for, obtain, or retain a
government benefit or entitlement.
You should know that electing to use the Accelerated Death Benefit
could have adverse tax consequences. You should consult a tax advisor
before electing to receive this benefit.
There is no charge for this rider.
Bonus on Contract Value in the Variable Account
A bonus may be credited to the Contract on each Monthly Anniversary Day. The
monthly bonus equals 0.0283% (0.245% on an annualized basis) of the Variable
Account Value in excess of $25,000 at the end of each Contract Month. This bonus
is not guaranteed, and Kansas City Life may decide not to pay the bonus.
