FEES AND EXPENSES

The following tables are designed to help you understand the fees and expenses that you bear, directly or indirectly, as a Policy Owner. The first table describes the Policy Charges and deductions you directly bear under the Policy. The second table describes the fees and expenses of the Portfolios that you bear indirectly when you purchase a Policy. (See "Charges and Deductions", beginning on page 30).

Mortality and Expense Risk
  Charge:                 0.90% of average daily net assets(1)

Federal Income Tax Charge:Currently none.(2)

                          CURRENT: The lower of: (i) the product of the
                          applicable current asset-based cost of insurance
                          charge times the Cash Value on the Deduction Day;(4)
                          and (ii) the product of the applicable guaranteed cost
                          of insurance rate times the net amount at risk.

                          If your initial Premium is no more than $500,000 and
                          you pay 100% of the Guideline Single Premium, the
                          current asset-based rate for Single Life Policies for
                          the Standard (NT)(5) rate class is 0.55% annually of
                          Cash Value for the first ten Policy Years and 0.25%
                          thereafter and the rate for Survivorship Policies for
                          the Standard (NT) rate class is 0.45% for the first
                          ten Policy Years and 0.20% thereafter.

                          If your initial Premium is more than $500,000 and you
                          pay 100% of the Guideline Single Premium, the current
                          asset-based rate for Single Life Policies for the
                          Standard (NT) rate class is 0.25% for the first ten
                          Policy Years and 0.10% thereafter and the rate for
                          Survivorship Policies for the Standard (NT) rate class
                          is 0.20% for the first ten Policy Years and 0.10%
                          thereafter.

                          GUARANTEED: Ranges from $.06 per $1,000 of net amount
                          at risk to $83.33 per $1,000 of net amount at risk.(6)

Administration Charge(7)  0.35% annually of average monthly Cash Value for
                          Policy Years 1-10

                          0.25% annually of average monthly Cash Value for
                          Policy Years 11 and later

Tax Charge(7)             0.40% annually of the average monthly Cash Value for
                          Policy Years 1-10

                          0.00% for Policy Years 11 and later

Records Maintenance
  Charge(8)               $30.00 per year, deducted annually, if your Cash Value
                          is less than $50,000 on the most recent Policy
                          Anniversary.

TRANSACTION CHARGES:

Transfer Fee:(9)          Currently none.

MAXIMUM WITHDRAWAL
  CHARGE:(10)             10% of the initial Premium
---------------

(1) Deducted each Valuation Period at a rate equivalent to the effective annual rate shown, multiplied by the Separate Account Value on the relevant Valuation Date, times the number of days in the relevant Valuation

Period. No mortality and expense risk charge is deducted from the Kemper Money Market II Subaccount, which is only available for Automatic Dollar Cost Averaging that will deplete the owner's Subaccount Value by the end of the first Policy Year.

(2) We currently do not assess a charge for federal income taxes that may be attributed to the operations of the Separate Account. We reserve the right to do so in the future. See "Charges and Deductions", beginning on page 30.

(3) Assessed monthly, allocated pro rata among all active Subaccounts and the DCA Fixed Account.

(4) The asset-based cost of insurance rate differs depending on Policy type and history of tobacco use of the Insured(s). The current-asset based cost of insurance rates also reflect whether you pay 90% or 100% of the Guideline Single Premium at issue (based on the initial Specified Amount). The asset-based rates that we set will reflect our expectations as to mortality experience under the Policies and other relevant factors, such that the aggregate actual cost of insurance charges paid under the Policies will compensate us for our aggregate mortality risks under the Policies. In our discretion, we may change the asset-based rate used in the current cost of insurance formula. Even if we change the asset-based rate, however, you will never be charged more than the amount determined using the guaranteed cost of insurance tables in your Policy. For further explanation, see "Charges and Deductions--Monthly Deduction--Cost of Insurance Charge", on page 30.

(5) The Standard (NT) rate class is our best rate class for Insureds who have not used tobacco of any kind within the past 36 months.

(6) The guaranteed cost of insurance charges are based on attained age, sex, and history of tobacco use of the Insured. The net amount at risk is the difference between the Death Benefit and the Cash Value. See "Charges and Deductions--Monthly Deduction--Cost of Insurance Charge", on page 30.

(7) Deducted monthly in an amount equal to 1/12 the annual rate shown, multiplied by the total Cash Value, including the Loan Account Value, on the relevant Deduction Day. The Administration Charge covers certain of our administrative expenses in connection with the Policies. The Tax Charge covers a portion of our state premium tax expense and certain federal income tax liability associated with the receipt of Premium.

(8) The Records Maintenance Charge is deducted annually on each Policy Anniversary. If you surrender your Policy during a Policy Year, we will deduct the Records Maintenance Charge from your surrender proceeds.

(9) We currently do not charge a transfer fee. Under the Policy, we reserve the right in the future to charge a transfer fee of $25 on each transfer after the first twelve transfers each Policy Year, excluding transfers under our Automatic Dollar Cost Averaging and Automatic Asset Rebalancing Programs.

(10) This charge only applies upon withdrawals of the initial Premium. It does not apply to withdrawals of any additional Premiums paid under a Policy. The Withdrawal Charge declines to zero percent after the ninth Policy Anniversary. It is imposed to cover a portion of our premium tax expenses and the sales expenses incurred by us in distributing the Policies. In any Policy Year, we will not charge any Withdrawal Charge on that portion of your withdrawals equal to the greater of (a) ten percent of the Cash Value, less any prior free partial withdrawal since the most recent Policy Anniversary, or (b) earnings not previously withdrawn. See Charges and Deductions--Withdrawal Charge, page 32.

PORTFOLIO EXPENSES
(As a percentage of average net assets for the period ended December 31, 1998)

(total expense figures shown in column titled "Total Fund Annual Expenses (Net)" are after fee waivers or reductions and expense reimbursements, as indicated in the notes)

                                                                                TOTAL FUND        TOTAL FUND
                                                MANAGEMENT     TOTAL FUND     ANNUAL EXPENSES   ANNUAL EXPENSES
PORTFOLIO                                          FEES      OTHER EXPENSES       (GROSS)            (NET)
---------                                       ----------   --------------   ---------------   ---------------
Kemper Aggressive Growth Portfolio(2)(4)......    0.75%           0.28%            1.03%             0.95%
Kemper Technology Growth Portfolio(2)(4)......    0.75%           0.29%            1.04%             0.95%
Kemper-Dreman Financial Services
  Portfolio(2)(5).............................    0.75%           0.97%            1.72%             0.99%
Kemper Small Cap Growth Portfolio.............    0.65%           0.05%            0.70%             0.70%
Kemper Small Cap Value Portfolio(1)...........    0.75%           0.05%            0.80%             0.80%
Kemper-Dreman High Return Equity
  Portfolio(2)(5).............................    0.75%           0.45%            1.20%             0.87%
Kemper International Portfolio................    0.75%           0.18%            0.93%             0.93%
Kemper International Growth and Income
  Portfolio(2)(5).............................    1.00%          18.54%           19.54%             1.12%
Kemper Global Blue Chip Portfolio(2)(5).......    1.00%          11.32%           12.32%             1.56%
Kemper Growth Portfolio.......................    0.60%           0.05%            0.65%             0.65%
Kemper Contrarian Value Portfolio(1)..........    0.75%           0.03%            0.78%             0.78%
Kemper Blue Chip Portfolio(1).................    0.65%           0.11%            0.76%             0.76%
Kemper Value+Growth Portfolio(1)..............    0.75%           0.03%            0.78%             0.78%
Kemper Index 500 Portfolio(6).................    0.45%           0.29%            0.74%             0.55%
Kemper Horizon 20+ Portfolio(1)...............    0.60%           0.07%            0.67%             0.67%
Kemper Total Return Portfolio.................    0.55%           0.05%            0.60%             0.60%
Kemper Horizon 10+ Portfolio(1)...............    0.60%           0.04%            0.64%             0.64%
Kemper High Yield Portfolio...................    0.60%           0.05%            0.65%             0.65%
Kemper Horizon 5 Portfolio(1).................    0.60%           0.06%            0.66%             0.66%
Kemper Global Income Portfolio(2).............    0.75%           0.33%            1.08%             1.05%
Kemper Investment Grade Bond Portfolio(1).....    0.60%           0.07%            0.67%             0.67%
Kemper Government Securities Portfolio........    0.55%           0.11%            0.66%             0.66%
Kemper Money Market Portfolio(3)..............    0.50%           0.04%            0.54%             0.54%
KVS Focused Large Cap Growth Portfolio(11)....    0.95%           0.57%            1.52%             1.15%
KVS Growth Opportunities Portfolio(11)........    0.95%           0.57%            1.52%             1.15%
KVS Growth And Income Portfolio(11)...........    0.95%           0.57%            1.52%             1.15%
Scudder VLIF Global Discovery Portfolio(7)....    0.91%           0.81%            1.72%             1.72%
Scudder VLIF Growth and Income Portfolio......    0.47%           0.09%            0.56%             0.56%
Scudder VLIF International Portfolio..........    0.87%           0.18%            1.05%             1.05%
Scudder VLIF Capital Growth Portfolio.........    0.47%           0.04%            0.51%             0.51%
Alger American Leveraged AllCap
  Portfolio(9)................................    0.85%           0.11%            0.96%             0.96%
Alger American Balanced Portfolio.............    0.75%           0.17%            0.92%             0.92%
The Dreyfus Socially Responsible Growth Fund,
  Inc.........................................    0.75%           0.05%            0.80%             0.80%
Dreyfus MidCap Stock Portfolio(10)............    0.75%           1.14%            1.89%             1.00%
Warburg Pincus Emerging Markets
  Portfolio(8)................................    1.25%           6.96%            8.21%             1.40%
Warburg Pincus Post-Venture Capital
  Portfolio(8)................................    1.25%           0.45%            1.70%             1.40%

(1) Pursuant to their respective agreements with Kemper Variable Series, the investment manager and the accounting agent have agreed, for the one year period commencing on approximately May 1, 1999, to limit their respective fees and to reimburse other operating expenses to the extent necessary to limit total operating expenses of the following described Portfolios to the amounts set forth after the Portfolio names: Kemper Value+Growth Portfolio (.84%), Kemper Contrarian Value Portfolio (.80%), Kemper Small Cap Value Portfolio (.84%), Kemper Horizon 5 Portfolio (.97%), Kemper Horizon 10+ Portfolio (.83%), Kemper Horizon 20+ Portfolio (.93%), Kemper Investment Grade Bond Portfolio (.80%), and Kemper Blue Chip Portfolio (.95%). The amounts set forth in the table above reflect actual expenses for the past fiscal year, which were lower than these expense limits.

(2) Pursuant to their respective agreements with Kemper Variable Series, the investment manager and the accounting agent have agreed, for the one year period commencing on approximately May 1, 1999, to limit

their respective fees and to reimburse other operating expenses of the Kemper Aggressive Growth, Kemper Technology Growth, Kemper-Dreman Financial Services, Kemper-Dreman High Return Equity, Kemper International Growth and Income, Kemper Global Blue Chip and Kemper Global Income Portfolios of Kemper Variable Series to the levels set forth in the table above in parentheses. Taking into effect these expense caps, for the Aggressive Growth, Technology Growth, Financial Services, High Return Equity, International Growth and Income, Global Blue Chip and Global Income Portfolios of Kemper Variable Series: management fees were .67%, .66%, .02%, .42%, .00%, .00% and .72%, respectively. Other Expenses were .28%, .29%, .97%, .45%, 1.12%, 1.56%, and .33%, respectively, and total operating expenses were .95%, .95%, .99%, .87%, 1.12%, 1.56%, and 1.05%, respectively. In addition, for Kemper International Growth and Income and Kemper Global Blue Chip, the investment manager has agreed to limit its management fee to .70% and .85%, respectively, of such portfolios for one year from the date of this Prospectus. The amounts set forth without parentheses in the table above reflect actual expenses for the past fiscal year. The Total Fund Annual Expense figures set forth in parentheses reflect the effect of the fee reductions and expense reimbursement arrangements described above.

(3) This Portfolio is the underlying investment for the Kemper Money Market Subaccount and the Kemper Money Market II Subaccount. The Kemper Money Market II Subaccount is only available to allocate all or a portion of your initial Premium for Automatic Dollar Cost Averaging that will deplete your Subaccount Value by the end of the first Policy Year.

(4) Portfolios commenced operations on 5/1/99. "Other Expenses" have been estimated.

(5) Portfolios commenced operations on or after 5/1/98. "Other Expenses" have been annualized.

(6) Portfolio commenced operations after 9/1/99. "Other Expenses" have been estimated. Pursuant to their respective agreements with Kemper Variable Series, the investment manager and the accounting agent have agreed, for the period from commencement of operations to April 30, 2000, to limit their respective fees and to reimburse other operating expenses of the Kemper Index 500 Portfolio to the level set forth in the table above in parentheses. Taking into effect this cap for the Kemper Index 500 Portfolio, Management Fees would be 0.26%, Other Expenses would be 0.29% and Total Operating Expenses would be 0.55%.

(7) Until April 30, 1998, the Adviser waived a portion of its management fee to limit the expenses of this Portfolio to 1.50% of the average daily net assets.

(8) The expense figures shown without parentheses are for fiscal year ended December 31, 1998. They do not reflect certain fee waivers or reductions from the Portfolios' investment adviser and its affiliates. With such waivers and reductions, Management Fees, Other Expenses, and Total Portfolio Annual Expenses for the Portfolios for the fiscal year ended December 31, 1998 were: 0.20%, 1.20%, and 1.40%, respectively, for the Emerging Markets Portfolio; and 1.08%, 0.32%, and 1.40%, respectively, for the Post-Venture Capital Portfolio. Fee waivers and expense reimbursements may be discontinued at any time. The Total Fund Annual Expense figures set forth in parentheses reflect the effect of the fee waiver and expense reduction arrangements described above.

(9) Included in Other Expenses is 0.03% of interest expense.

(10) The Dreyfus Corporation has agreed, until December 31, 1999, to waive receipt of its fees and/or assume the expenses of the portfolio so that expenses (excluding taxes, brokerage commissions, extraordinary expenses, interest expenses and commitment fees on borrowings) do not exceed 1.00%.

(11) Portfolios commenced operations on or after 10/29/99. "Other Expenses" have been estimated. Pursuant to its agreement with Kemper Variable Series, the investment manager has agreed, for the period from commencement of operations to April 30, 2000, to limit its fees and to reimburse other operating expenses of the KVS Focused Large Cap Growth Portfolio, the KVS Growth Opportunities Portfolio and the KVS Growth And Income Portfolio to the level set forth in the table above in parentheses. Taking into effect this cap for each of the KVS Focused Large Cap Growth Portfolio, the KVS Growth Opportunities Portfolio and the KVS Growth And Income Portfolio, Management Fees would be 0.58%, Other Expenses would be 0.57% and Total Operating Expenses would be 1.15%.

PURCHASE OF POLICY AND ALLOCATION OF PREMIUMS

APPLICATION FOR A POLICY

You may apply to purchase a Policy by submitting a written application to us through one of our authorized agents. We will issue Policies to insure people who are 90 years of age or younger. When you apply for a Policy, we will require you to submit evidence of insurability satisfactory to us. If we do not issue a Policy to you, we will return your Premium to you.

In general, we will deliver your Policy only when (1) we have received your initial Premium and (2) we have determined that your application meets our underwriting requirements. If you are paying Premium from more than one source, we will not issue your Policy until all Premium has been received. The Effective Date will be the effective date of insurance coverage under your Policy. We use the Effective Date to determine Policy Anniversaries, Policy Years, and Deduction Days. The Effective Date usually will be the date when we have received your initial Premium, after satisfaction of the applicable underwriting requirements.

We will not accept your initial Premium with your application if it exceeds our then-current limit. In other cases, you may choose to pay the initial Premium with your application. If you did not submit your initial Premium with your application, we will require you to pay your entire Premium before we place your insurance in force.

Acceptance of your application is subject to our underwriting rules. We reserve the right to reject your application for any lawful reason. We reserve the right to change the terms or conditions of your Policy to comply with differences in applicable state law. Variations from the information appearing in this Prospectus due to individual state requirements are described in supplements which are attached to this Prospectus or in endorsements to the Policy, as appropriate.

SIMPLIFIED UNDERWRITING. Under our current underwriting rules, which we may change when and as we decide, proposed Insureds are eligible for simplified underwriting without a medical examination, if the application responses and requested initial Premium meet our simplified underwriting standards. Simplified underwriting is not available if the initial Premium exceeds the limits set in our simplified underwriting standards. For Survivorship Policies, both Insureds must meet our simplified underwriting requirements. Simplified underwriting limits may vary by state.

STANDARD UNDERWRITING. If you are not eligible for simplified underwriting, we will process your application in accordance with our customary underwriting requirements. While your application is in underwriting, if you have paid your initial Premium we may provide you with temporary life insurance coverage in accordance with the terms of our temporary insurance agreement. Any temporary coverage may not exceed $500,000 plus the amount of your initial Premium. If you did not pay your Premium with your application, we will require you to pay your entire Premium before we place your insurance in force. If you pay Premium through more than one source, e.g., through the rollover of another policy, we will not place your Policy in force until all Premium has been received.

If we approve your application, you will earn interest and/or investment return on your Premium from the Effective Date. We will also begin to deduct the Policy charges as of the Effective Date.

If we reject your application, we will not issue you a Policy. We will return any Premium you have made, adding interest as and at the rate required in your state. We will not subtract any Policy charges from the amount we refund to You.

PREMIUMS

You must pay an initial Premium to purchase a Policy. You may choose a minimum initial Premium of 90% or 100% of the Guideline Single Premium for your Policy's initial Specified Amount. Your choice will affect your current cost of insurance charge. In addition, if you choose to pay 90%, your Policy will not include our No Lapse Guarantee. Under either option, the minimum initial Premium is $10,000. We may waive or change this minimum.

You may pay additional Premiums at any time and in any amount necessary to avoid termination of your Policy. In addition, we will accept any additional Premium at such time as it would not disqualify your Policy as a life insurance contract under the Tax Code. If you wish to repay Policy Debt (if any), you must send written instructions with your payment; otherwise, we will treat any payment received from you as additional Premium.

ALLOCATION OF PREMIUMS

If you pay all or a portion of your initial Premium prior to the Issue Date, we will initially allocate your payment to our Fixed Account. If we approve your application, we will credit interest to that amount at an effective rate of not less than 3% annually for the period from the Effective Date to the Issue Date.

On the Issue Date, if your state requires us to return your Premium if you cancel your Policy during the free look period, we will initially allocate your initial Premium (and any interest) to the Kemper Money Market Subaccount. Subsequently, on the Trade Date, we will allocate your Cash Value to the Subaccounts and/or the DCA Fixed Account (if you have selected it for Dollar Cost Averaging) in accordance with your instructions. The Trade Date will depend on the length of the free look period. If the free look period is ten days, the Trade Date

will occur twenty days after the Issue Date. If the free look period is longer, the Trade Date will occur a corresponding number of days later.

In other states, on the Issue Date we will allocate your initial Premium according to your instructions, because the Trade Date will be the same as the Issue Date.

You must specify your allocation percentages in your Policy application. The total allocation must equal 100%. We will allocate your subsequent Premiums in those proportions, until you give us new allocation instructions. You may change your allocation instructions orally or in writing. Your initial allocation to a Subaccount must equal at least $500. You may not allocate your Cash Value to more than 30 Subaccounts at one time. You may not allocate Premiums to the DCA Fixed Account after the initial Premium.

We generally will allocate your additional Premiums to the Subaccounts as of the date your Premium is received in our Home Office. We may refuse to accept any Premium that would cause an increase in the Death Benefit, other than a reinstatement Premium. We will make all valuations in connection with the Policy, other than the initial Premium and other Premium payments requiring an underwriting, on the date a Premium is received or your request for other action is received at our Home Office, if that date is a Valuation Date, or on the next succeeding Valuation Date.

CASH VALUE

Your Cash Value on any Valuation Date is the sum of the value of your interest in the Subaccounts you have chosen, your Fixed Account Value (if any), plus your Loan Account Value (if any). Your Cash Value may increase or decrease daily to reflect the performance of the Subaccounts you have chosen, the addition of interest credited to the Loan Account and the Fixed Account, the addition of Premiums, and the subtraction of partial withdrawals and charges assessed. There is no minimum guaranteed Cash Value.

On the Effective Date, your Cash Value will equal the initial Premium less the Monthly Deduction for the first Policy Month.

The Separate Account Value equals the sum of the Subaccount Values, each of which equals:

a. The total value of your Accumulation Units in the Subaccount; plus

b. Any Premium received and allocated to the Subaccount during the current Valuation Period; plus

c. Any amount transferred to the Subaccount during the current Valuation Period; minus

d. The pro-rata portion of any Monthly Deduction charged to the Subaccount when the Valuation Period includes a Deduction Day; minus

e. Any amount transferred from the Subaccount during the current Valuation Period; minus

f. Any amount withdrawn from the Subaccount during the current Valuation Period; minus

g. Any amount loaned from the Subaccount during the current Valuation Period.

ACCUMULATION UNIT VALUE

The Accumulation Unit Value for each Subaccount will vary to reflect the investment experience of the corresponding Portfolio and the deduction of certain expenses. We will determine the Accumulation Unit Value for each Subaccount on each Valuation Date. A Subaccount's Accumulation Unit Value for a particular Valuation Date will equal the Subaccount's Accumulation Unit Value on the preceding Valuation Date multiplied by the Investment Experience Factor for that Subaccount for the Valuation Period then ended.

The Investment Experience Factor for each Subaccount is (1) divided by (2) minus (3), where:

(1) is the sum of (a) the net asset value per share of the corresponding Portfolio at the end of the current Valuation Period plus (b) the per share amount of any dividend or capital gains distribution by that Portfolio, if the "ex-dividend" date occurs in that Valuation Period; plus or minus (c) a credit or charge for any taxes reserved for the current Valuation Period which we determine to have resulted from the investment operations of the Subaccount;

(2) is the net asset value per share of the corresponding Portfolio at the end of the last prior Valuation Period; and

(3) is the factor representing the Mortality and Expense Risk Charge.

You should refer to the Prospectuses for the Portfolios which accompany this Prospectus for a description of how the assets of each Portfolio are valued, since that determination directly affects the investment experience of the corresponding Subaccount and, therefore, your Cash Value.

TRANSFER OF CASH VALUE

While the Policy is in force before the Maturity Date, you may transfer Cash Value among the Subaccounts in writing or by telephone. We currently do not charge a transfer fee. However, under the Policy we reserve the right to charge a fee of $25 for each transfer in excess of twelve per Policy Year, excluding transfers under our Automatic Dollar Cost Averaging and Automatic Asset Rebalancing Programs. You may not transfer Cash Value to the DCA Fixed Account.

The minimum amount that may be transferred from a single Subaccount is $100, or the remaining value in the Subaccount, if the value that would remain in the Subaccount after the transfer would be less than $500. We reserve the right to waive or change these minimums.

As a general rule, we only make transfers on days when the New York Stock Exchange is open for business. If we receive your request on one of those days, we will make the transfer that day. Otherwise, we will make the transfer on the first subsequent day on which the NYSE is open. Transfers pursuant to a Automatic Dollar Cost Averaging or Automatic Asset Rebalancing program will be made at the intervals you have selected in accordance with the procedures and requirements we establish. We may suspend, modify, or terminate the transfer provisions.

TRANSFERS AUTHORIZED BY TELEPHONE

You may make transfers by telephone, if you so advise us in writing on our authorized forms. The cut off time for telephone transfer requests is 3:00 p.m. Central time. Timely requests will be processed on that day at that day's price. If we receive your request after 3:00 p.m. Central time, we will process your request at the next day's price.

We use procedures that we believe provide reasonable assurance that telephone authorized transfers are genuine. For example, we tape telephone conversations with persons purporting to authorize transfers and request identifying information. Accordingly, we disclaim any liability for losses resulting from allegedly unauthorized telephone transfers. We may suspend, modify or terminate the telephone transfer privilege at any time without notice.

AUTOMATIC DOLLAR COST AVERAGING

Under our Automatic Dollar Cost Averaging program, while the Policy is in force you may authorize us to transfer a fixed dollar amount monthly, quarterly, semiannually, or annually to the Subaccounts of your choice in accordance with the procedures and requirements that we establish. The transfers will continue until you instruct us to stop, or until your chosen source of transfer payments is exhausted. The minimum Automatic Dollar Cost Averaging transfer is $100 per transfer. Upon early termination of your Automatic Dollar Cost Averaging program, we will allocate the remaining amount from your source account to the Subaccounts in accordance with your instructions in our files. If you do not give us new instructions, we will follow the allocation instructions in our files.

You may make Dollar Cost Averaging transfers from any Subaccount. At issue, you may choose to allocate some or all of your initial Premium to the Kemper Money Market II Subaccount or to the DCA Fixed Account, for purposes of participating in the Dollar Cost Averaging Program. Amounts allocated to the Kemper Money Market II Subaccount or the DCA Fixed Account must be transferred to other Subaccounts by the first Policy Anniversary.

The Kemper Money Market II Subaccount invests in the Kemper Money Market Portfolio. However, the Mortality and Expense Risk Charge is not charged to this Subaccount.

We offer two DCA Fixed Account options in connection with the Automatic Dollar Cost Averaging Program: a six-month option and a twelve-month option. Amounts designated for one of these options will be transferred to the Subaccounts within six months or twelve months of the Effective Date, as appropriate. Until they are transferred, they will accrue interest at the rate we declare. We may declare different rates for the six-month and the twelve-month options. In our discretion, we may change the DCA Fixed Account options that we offer under the Policy. For more information, see "The DCA Fixed Account" on pages 21-22.

Your request to participate in this program will be effective when we receive your completed application at our Home Office at the address given on the first page of this Prospectus. Call or write us for a copy of the

application and additional information concerning the program. You may not use Automatic Dollar Cost Averaging and Automatic Asset Rebalancing at the same time. We may change, terminate, limit or suspend Automatic Dollar Cost Averaging at any time.

The theory of automatic dollar cost averaging is that by spreading your investment over time, you may be able to reduce the effect of transitory market conditions on your investment. In addition, because a given dollar amount will purchase more units when the unit prices are relatively low rather than when the prices are higher, in a fluctuating market, the average cost per unit may be less than the average of the unit prices on the purchase dates. However, participation in this program does not assure you of a greater profit from your purchases under the program; nor will it prevent or necessarily reduce losses in a declining market. Moreover, other investment programs may not work in concert with Automatic Dollar Cost Averaging. Therefore, you should monitor your use of these programs, as well as other transfers or withdrawals, while Automatic Dollar Cost Averaging is being used.

AUTOMATIC ASSET REBALANCING

Automatic Asset Rebalancing allows you to readjust the percentage of your Cash Value allocated to each Subaccount to maintain a pre-set level. Over time, the variations in each Subaccount's investment results will shift the balance of your Cash Value allocations. Under the Automatic Asset Rebalancing feature, we periodically will transfer your Cash Value, including new Premiums (unless you specify otherwise), back to the percentages you specify in accordance with procedures and requirements that we establish. you may select the Subaccounts to include in an Automatic Asset Rebalancing program.

You may request Automatic Asset Rebalancing when you apply for your Policy or by submitting a completed written request to us at our Home Office at the address given on the first page of this Prospectus. You may not use Automatic Asset Rebalancing and Automatic Dollar Cost Averaging at the same time. We may change, terminate, limit or suspend Automatic Asset Rebalancing at any time. Please call or write us for a copy of the request form and additional information concerning Asset Automatic Rebalancing.

Automatic Asset Rebalancing is consistent with maintaining your allocation of investments among market segments, although it is accomplished by reducing your Cash Value allocated to the better performing segments. Other investment programs may not work in concert with Automatic Asset Rebalancing. Therefore, you should monitor your use of these programs, as well as other transfers or withdrawals, while Automatic Asset Rebalancing is being used. We may change, terminate, limit, or suspend Automatic Asset Rebalancing at any time.

INVESTMENT OPTIONS

SEPARATE ACCOUNT INVESTMENTS: THE PORTFOLIOS.

Each of the Subaccounts invests in the shares of one of the Portfolios. Each Portfolio is an open-end management investment company or a separate investment series of an open-end management investment company registered under the Investment Company Act of 1940. We briefly describe the Portfolios below. You should read the current Prospectuses for the Portfolios for more detailed and complete information concerning the Portfolios, their investment objectives and strategies, and the investment risks associated with the Portfolios. If you do not have a Prospectus for a Portfolio, contact us and we will send you a copy.

Each Portfolio holds its assets separate from the assets of the other Portfolios, and each Portfolio has its own distinct investment objective and policies. Each Portfolio operates as a separate investment fund, and the income, gains, and losses of one Portfolio have no effect on the investment performance of any other Portfolio.

The Portfolios which currently are the permissible investments of the Separate Account under this Policy are the following registered investment companies or separate series thereof:

- Kemper Variable Series;

- Scudder Variable Life Investment Fund (Class A Shares);

- The Alger American Fund;

- The Dreyfus Socially Responsible Growth Fund, Inc.;

- Dreyfus Investment Portfolios;

- Warburg Pincus Trust.

The investment objectives of the Portfolios are briefly described below.

PORTFOLIOS OF KEMPER VARIABLE SERIES (FORMERLY INVESTORS FUND SERIES)

KEMPER AGGRESSIVE GROWTH PORTFOLIO seeks capital appreciation.

KEMPER TECHNOLOGY GROWTH PORTFOLIO seeks growth of capital.

KEMPER-DREMAN FINANCIAL SERVICES PORTFOLIO seeks long-term capital appreciation.

KEMPER SMALL CAP GROWTH PORTFOLIO seeks maximum appreciation of investors' capital.

KEMPER SMALL CAP VALUE PORTFOLIO seeks long-term capital appreciation.

KEMPER-DREMAN HIGH RETURN EQUITY PORTFOLIO seeks to achieve a high rate of total return.

KEMPER INTERNATIONAL PORTFOLIO seeks total return, a combination of capital growth and income.

KEMPER INTERNATIONAL GROWTH AND INCOME PORTFOLIO seeks long-term growth of capital and current income.

KEMPER GLOBAL BLUE CHIP PORTFOLIO seeks long-term growth of capital.

KEMPER GROWTH PORTFOLIO seeks maximum appreciation of capital.

KEMPER CONTRARIAN VALUE PORTFOLIO seeks to achieve a high rate of total return.

KEMPER BLUE CHIP PORTFOLIO seeks growth of capital and of income.

KEMPER VALUE+GROWTH PORTFOLIO seeks growth of capital. A secondary objective of the Portfolio is the reduction of risk over a full market cycle compared to a portfolio of only growth stocks or only value stocks.

KEMPER INDEX 500 PORTFOLIO seeks to match, as closely as possible, before expenses, the performance of the Standard & Poor's 500 Composite Stock Price Index, which emphasizes stocks of large U.S. companies.*

KEMPER HORIZON 20+ PORTFOLIO, designed for investors with approximately a 20+ year investment horizon, seeks growth of capital, with income as a secondary objective.

KEMPER TOTAL RETURN PORTFOLIO seeks high total return, a combination of income and capital appreciation.

KEMPER HORIZON 10+ PORTFOLIO, designed for investors with approximately a 10+ year investment horizon, seeks a balance between growth of capital and income, consistent with moderate risk.

KEMPER HIGH YIELD PORTFOLIO seeks to provide a high level of current income.

KEMPER HORIZON 5 PORTFOLIO, designed for investors with approximately a 5-year investment horizon, seeks income consistent with preservation of capital, with growth of capital as a secondary objective.

KEMPER GLOBAL INCOME PORTFOLIO seeks to provide high current income consistent with prudent total return asset management.

KEMPER INVESTMENT GRADE BOND PORTFOLIO seeks high current income.

KEMPER GOVERNMENT SECURITIES PORTFOLIO seeks high current return consistent with preservation of capital.

KEMPER MONEY MARKET PORTFOLIO seeks maximum current income to the extent consistent with stability of principal. The Portfolio seeks to maintain a net asset value of $1.00 per share.

KVS FOCUSED LARGE CAP GROWTH PORTFOLIO seeks growth through long-term capital appreciation.

KVS GROWTH OPPORTUNITIES PORTFOLIO seeks long-term growth of capital in a manner consistent with the preservation of capital.

KVS GROWTH AND INCOME PORTFOLIO seeks long-term capital growth and current income.

PORTFOLIOS OF SCUDDER VARIABLE LIFE INVESTMENT FUND (CLASS A SHARES)

SCUDDER VLIF GLOBAL DISCOVERY PORTFOLIO seeks above-average capital appreciation over the long term by investing primarily in the equity securities of small companies located throughout the world.

SCUDDER VLIF GROWTH AND INCOME PORTFOLIO seeks long-term growth of capital, current income and growth of income from a portfolio consisting primarily of common stocks and securities convertible into common stocks.

SCUDDER VLIF INTERNATIONAL PORTFOLIO seeks long-term growth of capital principally from a diversified portfolio of foreign equity securities.

SCUDDER VLIF CAPITAL GROWTH PORTFOLIO seeks to maximize long-term capital growth from a portfolio consisting primarily of equity securities.

THE ALGER AMERICAN FUND

ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO seeks long-term capital appreciation.

ALGER AMERICAN BALANCED PORTFOLIO seeks current income and long-term capital appreciation.

THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, 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.

DREYFUS INVESTMENT PORTFOLIOS

DREYFUS MIDCAP STOCK PORTFOLIO seeks investment results that are greater than the total return performance of publicly traded common stocks of medium-size domestic companies in the aggregate, as represented by the Standard & Poor's MidCap 400(R) Index.

PORTFOLIOS OF WARBURG PINCUS TRUST

WARBURG PINCUS EMERGING MARKETS PORTFOLIO seeks long-term growth of capital by investing in equity securities of emerging markets.

WARBURG PINCUS POST-VENTURE CAPITAL PORTFOLIO seeks long-term growth of capital by investing primarily in equity securities of U.S. companies considered to be in their post-venture-capital stage of development.

Not all Subaccounts may be available under your Policy. You should contact your representative for further information on the availability of the Subaccounts.

Scudder Kemper Investments, Inc. ("Scudder Kemper") is the investment manager for the twenty-six available Portfolios of Kemper Variable Series and the four available Portfolios of Scudder Variable Life Investment Fund.

Scudder Investments (U.K.) Limited ("Scudder U.K."), an affiliate of Scudder Kemper, is the sub-adviser for the Kemper International Portfolio and the Kemper Global Income Portfolio. Under the terms of the Sub-Advisory Agreement with Scudder Kemper, Scudder U.K. renders investment advisory and management services for that portion of these Portfolios' assets that Scudder Kemper from time to time allocates to Scudder U.K. for management, including services related to foreign securities, foreign currency transactions, and related investments.

Dreman Value Management L.L.C. ("DVM") serves as sub-adviser for the Kemper-Dreman High Return Equity and Kemper-Dreman Financial Services Portfolios. Under the terms of the Sub-Advisory Agreement between Scudder Kemper and DVM for each Portfolio, DVM manages the investment and reinvestment of each Portfolio's assets in accordance with its investment objectives, policies and limitations and subject to the supervision of Scudder Kemper and the Board of Trustees.

Bankers Trust Company ("Bankers") serves as sub-adviser for the Kemper Index 500 Portfolio. Under the terms of the Sub-Advisory Agreement between Scudder Kemper and Bankers, Bankers will handle day-to-day investment and trading functions for the Portfolio under the guidance of Scudder Kemper.

Eagle Asset Management, Inc. ("Eagle") is the sub-adviser for the KVS Focused Large Cap Growth Portfolio. Under the terms of a Sub-Advisory Agreement with Scudder Kemper, Eagle will handle day-to-day

investment and trading functions for the KVS Focused Large Cap Growth Portfolio under the guidance of Scudder Kemper.

Janus Capital Corporation ("Janus") serves as the sub-adviser for the KVS Growth And Income Portfolio and the KVS Growth Opportunities Portfolio. Under the terms of Sub-Advisory Agreements with Scudder Kemper, Janus will handle day-to-day investment and trading functions for the KVS Growth And Income Portfolio and the KVS Growth Opportunities Portfolio under the guidance of Scudder Kemper.

Fred Alger Management, Inc. serves as the investment adviser for the Alger American Leveraged AllCap Portfolio and the Alger American Balanced Portfolio.

The Dreyfus Corporation is the investment adviser for The Dreyfus Socially Responsible Growth Fund, Inc. and the Dreyfus Midcap Stock Portfolio. NCM Capital Management Group, Inc. serves as the sub-adviser for The Dreyfus Socially Responsible Growth Fund, Inc.

Credit Suisse Asset Management, LLC (successor to Warburg Pincus Asset Management, Inc.) is the investment adviser for the two available Portfolios of the Warburg Pincus Trust. Abbott Capital Management LLC serves as sub-adviser for the private-equity portfolio portion of the Warburg Pincus Post-Venture Capital Portfolio.

We do not promise that the Portfolios will meet their investment objectives. Amounts you have allocated to Subaccounts may grow in value, decline in value, or grow less than you expect, depending on the investment performance of the Portfolios in which those Subaccounts invest. You bear the investment risk that those Portfolios possibly will not meet their investment objectives.
YOU SHOULD CAREFULLY REVIEW THE PORTFOLIOS' PROSPECTUSES BEFORE ALLOCATING AMOUNTS TO THE SUBACCOUNTS.

Each Portfolio is subject to certain investment restrictions and policies which may not be changed without the approval of a majority of the shareholders of the Portfolio. See the accompanying Prospectuses of the Portfolios for further information.

We automatically reinvest all dividends and capital gains distributions from the Portfolios in shares of the distributing Portfolio at their net asset value. The income and realized and unrealized gains or losses on the assets of each Subaccount are separate and are credited to or charged against the particular Subaccount without regard to income, gains or losses from any other Subaccount or from any other part of our business. We will use the Premiums you allocate to a Subaccount to purchase shares in the corresponding Portfolio and will redeem shares in the Portfolios to meet Policy obligations or make adjustments in reserves. The Portfolios are required to redeem their shares at net asset value and to make payment within seven days.

Some of the Portfolios have been established by investment advisers which manage publicly traded mutual funds having similar names and investment objectives. While some of the Portfolios may be similar to, and may in fact be modeled after publicly traded mutual funds, you should understand that the Portfolios are not otherwise directly related to any publicly traded mutual fund. Consequently, the investment performance of publicly traded mutual funds and any similarly named Portfolio may differ substantially.

Certain of the Portfolios sell their shares to separate accounts underlying both variable life insurance and variable annuity policies. It is conceivable that in the future it may be unfavorable for variable life insurance separate accounts and variable annuity separate accounts to invest in the same Portfolio. Although neither we nor any of the Portfolios currently foresees any such disadvantages either to variable life insurance or variable annuity owners, each Portfolio's Board of Directors intends to monitor events in order to identify any material conflicts between variable life and variable annuity owners and to determine what action, if any, should be taken in response thereto. If a Board of Directors were to conclude that separate investment funds should be established for variable life and variable annuity separate accounts, Owners will not bear the attendant expenses.

VOTING RIGHTS

As a general matter, you do not have a direct right to vote the shares of the Portfolios held by the Subaccounts to which you have allocated your Cash Value. Under current interpretations, however, you are entitled to give us instructions on how to vote those shares on certain matters. We will notify you when your instructions are needed and will provide proxy materials or other information to assist you in understanding the matter at issue. We will determine the number of votes for which you may give voting instructions as of the record date set by the relevant Portfolio for the shareholder meeting at which the vote will occur.

As a general rule, you are the person entitled to give voting instructions. However, if you assign your Policy, the assignee may be entitled to give voting instructions. Retirement plans may have different rules for voting by plan participants.

If you send us written voting instructions, we will follow your instructions in voting the Portfolio shares attributable to your Policy. If you do not send us written instructions, we will vote the shares attributable to your Policy in the same proportions as we vote the shares for which we have received instructions from other Owners. We will vote shares that we hold in the same proportions as we vote the shares for which we have received instructions from other Owners.

We may, when required by state insurance regulatory authorities, disregard Owner voting instructions if the instructions require that the shares be voted so as to cause a change in the subclassification or investment objective of one or more of the Portfolios or to approve or disapprove an investment advisory contract for one or more of the Portfolios.

In addition, we may disregard voting instructions given by Owners in the investment objectives or the investment adviser of the Portfolios if we reasonably disapprove of the proposed change. We would disapprove a proposed change only if the proposed change is contrary to state law or prohibited by state regulatory authorities or we reasonably conclude that the proposed change would not be consistent with the investment objectives of the Portfolio or would result in the purchase of securities for the Portfolio which vary from the general quality and nature of investments and investment techniques utilized by the Portfolio. If we disregard voting instructions, we will include a summary of that action and our reasons for that action in the next semi-annual financial report to You.

This description reflects our view of currently applicable law. If the law changes or our interpretation of the law changes, we may decide that we are permitted to vote the Portfolio shares without obtaining instructions from our Owners, and we may choose to do so.

ADDITIONS, DELETIONS, AND SUBSTITUTIONS OF SECURITIES

If the shares of any of the Portfolios are no longer available for investment by the Separate Account or if, in our judgment, further investment in the shares of a Portfolio is no longer appropriate in view of the purposes of the Policy, we may add or substitute shares of another Portfolio or mutual fund for Portfolio shares already purchased or to be purchased in the future by Premiums under the Policy. Any substitution will comply with the requirements of the 1940 Act.

We also reserve the right to make the following changes in the operation of the Separate Account and the Subaccounts:

(a) to operate the Separate Account in any form permitted by law;

(b) to take any action necessary to comply with applicable law or obtain and continue any exemption from applicable laws;

(c) to transfer assets from one Subaccount to another, or from any Subaccount to our General Account;

(d) to add, combine, or remove Subaccounts in the Separate Account;

(e) to assess a charge for taxes attributable to the operation of the Separate Account or for other taxes, as described in "Charges and Deductions--Separate Account Charges" on page 30 below; and

(f) to change the way in which we assess other charges, as long as the total other charges do not exceed the maximum guaranteed charges under the Policies.

If we deem it to be in the best interests of persons having voting interest under the Policies, the Separate Account may be (a) operated as a management company under the 1940 Act, (b) deregistered under the 1940 Act if such registration is no longer required; or (c) combined with our other separate accounts. To the extent permitted by law, we may also transfer assets of the Separate Account to another separate account, or to our General Account.

If we take any of these actions, we will comply with the then applicable legal requirements.

THE DCA FIXED ACCOUNT

THE PORTION OF THE POLICY RELATING TO THE FIXED ACCOUNT IS NOT REGISTERED UNDER THE SECURITIES ACT OF 1933 AND THE FIXED ACCOUNT IS NOT REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940. ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTEREST IN THE FIXED ACCOUNT IS SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT, AND THE DISCLOSURE REGARDING THE FIXED ACCOUNT HAS NOT BEEN REVIEWED BY THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION. THE STATEMENTS ABOUT THE FIXED ACCOUNT IN

THIS PROSPECTUS MAY BE SUBJECT TO GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS REGARDING ACCURACY AND COMPLETENESS.

You may allocate part or all of your initial Premium to the DCA Fixed Account, to be transferred subsequently to the Subaccounts under our Dollar Cost Averaging Program. In addition, we allocate your initial Premium to our Fixed Account for the period prior to the Issue Date, if you pay all or a portion of your initial Premium prior to the Issue Date. No other Fixed Account option currently is available under this Contract. We reserve the right to discontinue offering or to offer additional Fixed Account options under the Contract, in accordance with applicable law.

The interest rate credited to amounts allocated to the Fixed Account, including the DCA Fixed Account will be shown in your Policy. We may change the rate credited to new Policies at any time in our discretion. We set interest rates in accordance with then current market conditions and other factors.

Amounts allocated to the Fixed Account become part of the general account of KILICO. KILICO invests the assets of the general account in accordance with applicable laws governing the investments of insurance company general accounts.

POLICY BENEFITS AND RIGHTS

DEATH BENEFIT

While your Policy is in force, we will pay the Death Benefit proceeds upon the death of the Insured or, if your Policy is a Survivorship Policy, upon the death of the second Insured to die. We will pay the Death Benefit proceeds to the named Beneficiary(ies) or, if none survives, to contingent Beneficiary(ies). We will pay the Death Benefit proceeds in a lump sum or apply them under the Policy's settlement options, which are described in "Settlement Option Payments" on pages 25-27.

The Death Benefit proceeds payable to the Beneficiary equal the Death Benefit, less any Policy Debt and less any due and unpaid charges. We will determine the amount of the Death Benefit proceeds as of the end of the Valuation Period following the date of death of the Insured (or second Insured). We must receive due proof of death within 60 days after the death of an Insured, or as soon thereafter as reasonably possible. We usually will pay the Death Benefit proceeds within seven days after we have received all required documentation. Payment may be postponed in certain circumstances. See "Postponement of Payments", at page 29.

The Death Benefit generally is the greater of: (1) the Specified Amount; or
(2) the Cash Value at the date of death multiplied by a factor from the table of death benefit factors. The death benefit factors in the table reflect the "corridor percentages" for the guideline premium test under the Tax Code.

We set the death benefit factors so as to ensure that Policies will qualify for favorable tax treatment. The death benefit factors vary according to the age of the Insured. Under this formula, an increase in Cash Value due to favorable investment experience may increase the Death Benefit above the Specified Amount, and a decrease in Cash Value due to unfavorable investment experience may reduce the Death Benefit (but not below the Specified Amount). However, as explained in "No Lapse Guarantee and Grace Period" and "Termination" at pages 27-28 below, if your Policy's Net Surrender Value is insufficient to cover a Monthly Deduction when due, the Death Benefit may be reduced to equal your total Premium payments (less any prior withdrawals of Premium) or, if you have any outstanding Policy Debt, your Policy may lapse.

                                                              EXAMPLE A   EXAMPLE B
                                                              ---------   ---------
Specified Amount............................................  $100,000    $100,000
Insured's Age...............................................        60          60
Cash Value on Date of Death.................................  $ 80,000    $ 50,000
Applicable Death Benefit Factors............................       130%        130%
Death Benefit...............................................  $104,000    $100,000

In Example A, the Death Benefit equals $104,000, i.e., the greater of $100,000 (the Specified Amount) and $104,000 (the Cash Value at the Date of Death of $80,000, multiplied by the corridor percentage of 130%). This amount, less any Policy Debt and unpaid charges, constitutes the Death Benefit proceeds that we would pay to the Beneficiary.

In Example B, the Death Benefit is $100,000, i.e., the greater of $100,000 (the Specified Amount) or $65,000 (the Cash Value of $50,000 multiplied by the corridor percentage of 130%).

As explained in more detail in "Federal Tax Considerations" beginning on page 35, we have structured the Policy to satisfy the definition of life insurance contract under Section 7702 of the Tax Code. As a result, the Death Benefit ordinarily will be excluded from the gross income of the Beneficiary, and any growth in the Cash Value of the Policy will not be taxable until distributed. However, because the Policy generally will be treated as a modified endowment contract for tax purposes, withdrawals and Policy Debt will be treated as coming first from any gain under your Policy, and then as a return of Premium. The income portion of the distribution is includable in your taxable income. In addition, a ten percent federal penalty tax may apply to the taxable portion of the distributions received before age 59 1/2. For advice about the tax consequences of purchasing a Policy or your specific circumstances, please consult your tax adviser.

ACCELERATED DEATH BENEFIT RIDER

You may request payment of a portion of the Death Benefit as an Accelerated Death Benefit if the Insured becomes terminally ill. You generally may request an Accelerated Death Benefit of up to the lesser of 50% of the existing Death Benefit or $250,000. Before we pay your Accelerated Death Benefit, we will deduct a $150 administrative fee and an amount sufficient to repay any outstanding Policy Debt. In approved states, the Accelerated Death Benefit Rider will be issued with all Policies at no extra Premium.

If you request an Accelerated Death Benefit, the balance of the Death Benefit is payable upon the Insured's death. We will reduce the Death Benefit payment by the amount previously paid, increased to reflect the early payment of a portion of the Death Benefit under this Rider. You may request an Accelerated Death Benefit only once. Under Survivorship Policies, the Accelerated Death Benefit may not be requested until after the death of one of the Insureds. The total Accelerated Death Benefits available under all life insurance policies issued to you by us or our affiliates is $250,000.

In general, the tax treatment of accelerated death benefits is the same as the tax treatment of the Death Benefit, as described in "Federal Tax Considerations" beginning on page 35. Please consult your tax adviser for more information.

POLICY LOANS

While the Policy is in force, you may borrow money from us using the Policy as the only security for your loan. Loans have priority over the claims of any assignee or any other person. You may borrow up to 90% of the Surrender Value of your Policy as of the end of the Valuation Period in which we receive your loan request. Any outstanding Policy Debt will count against that limit. Thus, for example, if the Surrender Value of your Policy was $100,000 and you already had $50,000 in Policy Debt outstanding, you could borrow an additional $40,000 ($100,000 X 90% - $50,000). The minimum loan amount is $1,000. In addition, if you have named an irrevocable Beneficiary, you must also obtain his or her written consent before we make a Policy Loan to You.

YOU MAY REALIZE TAXABLE INCOME WHEN YOU TAKE A POLICY LOAN. In most instances, a Policy is treated as a "modified endowment contract" for federal tax purposes. As a result, Policy Loans are treated as withdrawals for tax purposes, and the amount of the loan equal to any increase in your Cash Value may be treated as taxable income to You. In addition, you may also incur an additional ten percent federal penalty tax. You should also be aware that interest on Policy Loans is generally not deductible. On the other hand, although a Policy Loan is treated as a withdrawal for tax purposes, it is treated differently for Policy purposes. For example, under the Policy, a Policy Loan, unlike a partial withdrawal, does not reduce the Specified Amount. Accordingly, before you take a Policy Loan, you should consult your tax adviser and carefully consider the potential impact of a Policy Loan on your rights and benefits under the Policy.

While the Policy remains in force, you may repay a Policy Loan in whole or in part without any penalty at any time while the Insured is living.

The loan interest rate on all Policy Loans will be 5.50% per year compounded daily. Interest not paid will be charged on a daily basis and will be added to the Policy Debt on this Policy and bear interest at the same rate.

When we make a Policy Loan to you, an amount equal to the Loan will be transferred from the Subaccounts to the Loan Account until the Loan is repaid. Unless you instruct us otherwise, the amount of the Loan will be deducted pro rata from the Subaccounts and DCA Fixed Account based on their relative Subaccount Values or DCA Fixed Account Values under your Policy. As explained in "No Lapse Guarantee and Grace Period" at page 27 below, if the Policy Debt outstanding under your Policy should ever equal or exceed the Net Surrender Value, your Policy will enter the grace period and may terminate if you do not pay sufficient additional Premium.

We reserve the right not permit you to borrow Cash Value derived from Premium paid in the form of a check or draft for up to 30 days after we deposit that check or draft.

We will credit interest at an annual rate of 3.50% to your Loan Account Value that is not attributable to "Preferred Loans." As to any Loan Account Value attributable to "Preferred Loans", we currently credit interest at an annual rate of 5.50%. We may change that rate, but we will never reduce it to less than 3.5% annually. We will classify as "Preferred Loans" the portion of your total Loan Account Value equal to the difference between your Policy's Cash Value minus total Premiums paid (net of all prior withdrawals of Premium). If you purchase your Policy in exchange for a policy with another insurance company, we will accept up to 50% of the Cash Value as a rollover loan. We will treat as a Preferred Loan the portion of the rollover loan equal to the cash value of your old policy, minus the total premiums paid under your old policy, plus any withdrawal of premiums under your old policy prior to the exchange.

A Policy Loan, whether or not repaid, will have a permanent effect on the Cash Value because the investment results of each Subaccount will apply only to the amounts remaining in those Subaccounts. The longer a loan is outstanding, the greater the effect is likely to be. The effect could be favorable or unfavorable. If the Subaccounts earn more than the annual interest rate for amounts held in the Loan Account, your Cash Value will not increase as rapidly as it would if you had not taken a Policy Loan. If the Subaccounts earn less than that rate, then your Cash Value will be greater than it would have been if you had not taken a Policy Loan. Also, if you do not repay a Policy Loan, your Policy Debt will be subtracted from the Death Benefit and Surrender Value otherwise payable.

AMOUNT PAYABLE ON SURRENDER OF THE POLICY

While your Policy is in force, you may fully surrender your Policy. Upon surrender, we will pay you the Net Surrender Value determined as of the day we receive your written request at our Home Office. Your Policy will terminate on the day we receive your written request. We may require that you give us your Policy document before we pay you the surrender proceeds. Before we pay a full surrender, you must provide us with tax withholding information.

The Net Surrender Value equals the Cash Value less any applicable Withdrawal Charge, less any outstanding Policy Debt. We also will deduct the $30 Records Maintenance Charge, if it would otherwise be due at the end of the current Policy Year. We will determine the Net Surrender Value as of the end of the Valuation Period during which we received your request for surrender. We generally will pay you the surrender proceeds of the Policy within seven days of our receiving your complete written request or on the effective surrender date you have requested, whichever is later. The determination of the Withdrawal Charge is described on page 32.

You may receive the surrender proceeds in a lump sum or under any of the settlement options described in "Settlement Option Payments" on pages 25-27. The tax consequences of surrendering the Policy are discussed in "Federal Tax Considerations," beginning on page 35.

PARTIAL WITHDRAWALS

You may receive a portion of the Surrender Value of your Policy by making a partial withdrawal from your Policy. Your request may be by telephone or in writing. If you request a partial withdrawal by telephone, however, the amount withdrawn may not exceed our limit, which currently is $10,000; larger requests must be in writing. All partial withdrawals requested by telephone will be sent only to the address of record of the Contract owner. Your request, whether written or telephonic, will be effective on the date we receive it at our Home Office, provided we receive it before 3:00 p.m. Central time. If we are not provided with tax withholding information, we will withhold taxes from the amount withdrawn at the rate required by law. We reserve the right to change the terms of telephonic withdrawals, including our limit, at any time.

When you request a partial withdrawal, we will pay you the amount requested and subtract the amount requested plus any applicable Withdrawal Charge from your Cash Value. We may waive the Withdrawal Charge on some or all of your partial withdrawal. The determination of the Withdrawal Charge is described on page 32.

You may specify how much of your partial withdrawal you wish taken from each Subaccount. The amount requested from a specific Subaccount may not exceed the value of that option less any applicable Withdrawal Charge. If you do not specify the option from which you wish to take your partial withdrawal, we will take it pro rata from the Subaccounts and the DCA Fixed Account.

You may take an unlimited number of partial withdrawals each Policy Year. The minimum withdrawal amount is $100 or the amount that remains in the Subaccount if less. The minimum balance in the Subaccount after the withdrawal is $500 unless the total Subaccount Value is withdrawn. If a partial withdrawal would reduce your Policy's Net Surrender Value below $5,000, we will treat your request as a request to surrender your Policy.

When you take a partial withdrawal, your Specified Amount will decrease in proportion to the resulting reduction in Cash Value. We will notify you of the new Specified Amount. We will not permit a partial withdrawal that would reduce the Specified Amount below the minimum specified in your Policy.

Partial withdrawals generally will be subject to income tax and may be subject to a ten percent federal penalty tax. The tax consequences of partial withdrawals are discussed in "Federal Tax Considerations" beginning on page 35.

SYSTEMATIC WITHDRAWALS

You may enroll in our systematic withdrawal program by sending a completed enrollment form to our Home Office at the address shown on the first page of this Prospectus. You may choose between payout schedules of monthly, quarterly, semiannually or annually. You may specify the amount of the withdrawal, the day of the month for each scheduled payment, and the Subaccount(s) from which the withdrawal will be taken. You may start, stop, increase, or decrease payment at any time. The minimum withdrawal amount is $100.

We will treat systematic withdrawals in the same way as other partial withdrawals in applying the Withdrawal Charge. In our discretion we may stop paying systematic withdrawals if your Cash Value falls below our current minimum. We reserve the right to modify or suspend the systematic withdrawal program. In our discretion, any change may apply to existing systematic plans. Write us at the address shown on the first page of this Prospectus or call us at
(800) 621-5001 for more information about our Systematic Withdrawal Program.

SETTLEMENT OPTION PAYMENTS

GENERAL. We will pay the Surrender Value or Death Benefit proceeds under the Policy in a lump sum or under one of the settlement options that we then offer. The option selected must result in a payment that is at least equal to our minimum payment, according to our rules, at the time the settlement option is chosen. If at any time the payments are less than the minimum payment, we have the right to increase the period between payments to quarterly, semi-annually, or annually so that the payment is at least equal to the minimum payment, or to make payment in one lump sum.

The amount of the payments under a settlement option are based on:

- the settlement option table specified in the Contract;

- the selected settlement option; and

- the investment performance of the selected Subaccount(s) (if variable payments are chosen).

Under each settlement option, you and/or the payee may choose fixed payments or variable payments or a combination of the two, except that only fixed payments are available under Option 1. If fixed payments are chosen, the payee receives a fixed amount each month determined in accordance with the settlement option you have chosen. If variable payments are chosen, the payee receives the value of a fixed number of Annuity Units each month. An Annuity Unit's value reflects the investment performance of the Subaccount(s) selected by the payee. The amount of each payment varies accordingly. If you do not provide instructions, we will initially apply your Separate Account Value to variable payments and any Fixed Account Value to fixed payments. The payee may change the Subaccounts or the relative weighting of the Subaccounts on which variable payments are based, or increase the portion of each payment that is a fixed payment, subject to certain limitations, as described below under "Settlement Option Payments--Transfers". BEFORE CHOOSING VARIABLE PAYMENTS, YOU
SHOULD CONSIDER WHETHER THE ALLOCATION OF PROCEEDS AMONG THE SUBACCOUNTS FOR YOUR PERIODIC PAYMENTS IS THE ALTERNATIVE BEST SUITED TO YOUR NEEDS.

You may request a settlement option by writing to us at our Home Office at the address given on the first page of this Prospectus before the death of the Insured. If you change the Beneficiary, the existing choice of settlement option will become invalid and you may either notify us that you wish to continue the pre-existing choice of settlement option or select a new one. We will issue a supplementary contract reflecting the terms of the settlement option chosen. If payment is made as a Death Benefit distribution, the effective date of the supplementary agreement will be the date of death. Otherwise, you may choose the effective date.

SETTLEMENT OPTIONS. The following settlement options are available under the Policy:

OPTION 1--FIXED INSTALLMENT ANNUITY. We will make monthly payments for a fixed number of installments. Payments must be made for at least 5 years, but not more than 30 years.

OPTION 2--LIFE ANNUITY. We will make monthly payments while the payee is alive. It is possible for the payee to receive only one payment if the payee dies before the second payment is due.

OPTION 3--LIFE ANNUITY WITH INSTALLMENTS GUARANTEED. We will make monthly payments for a guaranteed period and thereafter while the payee is alive. The guaranteed period must be selected at the time the annuity option is chosen. The guaranteed periods available are 5, 10, 15, and 20 years.

OPTION 4--JOINT AND SURVIVOR ANNUITY. We will pay the full monthly income while both payees are alive. Upon the death of either payee, we will continue to pay the surviving payee a percentage of the original monthly payment. The percentage payable to the surviving payee must be selected at the time the annuity option is chosen. The percentages available are 50%, 66 2/3%, 75%, and 100%. It is possible for the payees to receive only one payment if they both die before the second payment is due.

OTHER OPTIONS. We may make other settlement annuity options available. Payments are also available on a quarterly, semi-annual or annual basis.

When the payee dies under Options 1 and 3, we will pay the commuted value of any unpaid installments in a lump sum to the estate of the payee, unless the supplementary agreement provides otherwise. We will determine the commuted amount based upon an interest rate of not less than 2.5%. You may not withdraw Cash Value once we begin making payments to you under any settlement option involving payments to the payee for life or any combination of payments for life and a minimum guaranteed payment period, such as options 2, 3, and 4.

AMOUNT OF PAYMENT. The amount applied to a settlement option will equal the Cash Value on the first day preceding the date when the first annuity payment is due, less any applicable Withdrawal Charge and Records Maintenance Charge. The remainder will be used to determine the fixed or variable payment in accordance with the appropriate Settlement Option Table.

The amount of each fixed payment is determined by multiplying the amount applied to the settlement option by the appropriate settlement option rate. We will use a rate at least as high as the rate shown in the appropriate Settlement Option Table. These tables show the monthly payment for each $1,000 of Cash Value allocated to fixed payments. The amount of each subsequent fixed payment does not change regardless of investment, mortality or expense experience.

The amount of the first variable payment also is determined from the Settlement Option Tables, based on the Cash Value allocated to variable payments. Subsequent variable payments are determined by multiplying the number of Annuity Units in each Subaccount chosen by the payee times the Annuity Unit Value of each such Subaccount at the Valuation Period before each variable payment is due. The first variable payment is divided by the Annuity Unit Value as of the Annuity Date to establish the number of Annuity Units representing each variable payment. We determine the number of Annuity Units separately for each Subaccount on which variable payments are based. This number does not change, unless the payee makes a transfer as described in "Settlement Option Payments--Transfers" below.

The guaranteed monthly payments shown in the Settlement Option Tables are based on an interest rate of 2.50% per year and, where mortality is involved, the "1983 Table a", an individual mortality table developed by the Society of Actuaries, projected using Projection Scale G. Interest under a settlement option begins to accrue on the effective date of the supplementary agreement. If the effective date determined as described above would be the 29th, 30th or 31st day of a month, the 28th day of that month will be deemed the Effective Date.

TRANSFERS. While variable payments are being made under a settlement option, the payee may request, in writing, to change the Subaccounts or the relative weighting of the Subaccounts on which variable payments are based, or the relative proportions of variable and fixed payments. These changes may be effected by transferring Annuity Unit Value from one Subaccount to another or to fixed payments, or by making transfers from fixed payments to the Subaccounts. This type of transfer is subject to the following limitations:

- The payee may make only one transfer during each twelve month period beginning on the date of the first settlement payment and each anniversary of that date.

- We must receive the payee's written request at least 30 days before the effective date of the transfer.

- Each transfer must consist of at least $1,000 of Annuity Unit Value or annuity reserve value. After the transfer, at least $1,000 of Annuity Unit Value or annuity reserve value must remain in the account from which the transfer was made, unless the entire amount is transferred.

- After the transfer, the payee's variable payments may not be based on more than three Subaccounts.

We will execute transfers using values as of the end of the Valuation Period preceding the effective date of the transfer. Transfers among the Subaccounts and transfers from fixed to variable payments will be effected at the Annuity Unit Value of the relevant Subaccounts. Transfers from variable to fixed payments will be based in part on the present value of the remaining payments under the chosen option, and will reflect the differences in the interest rates used to calculate fixed and variable payments. The method for calculating these transfers is described in more detail in the Policy. We may suspend, change or terminate the transfer privilege at any time.

ANNUITY UNIT VALUE. Annuity Unit Value is determined independently for each Subaccount. Annuity Unit Value for any Valuation Period is:

- Annuity Unit Value for the immediately preceding Valuation Period; times

- the net investment factor for the current Valuation Period; times

- an interest factor of .99993235 per calendar day of the current Valuation Period in order to offset the effect of the assumed rate of 2.5% per year used in the Policy's settlement option tables.

The net investment factor for a Subaccount for any Valuation Period is:

(1) the sum of (a) the net asset value per share of the corresponding Portfolio at the end of the current Valuation Period plus (b) the per share amount of any dividend or capital gains distribution by that Portfolio, if the "ex-dividend" date occurs in that Valuation Period; plus or minus (c) a credit or charge for any taxes reserved for the current Valuation Period which we determine to have resulted from the investment operations of the Subaccount; divided by

(2) is the net asset value per share of the corresponding Portfolio at the end of the last prior Valuation Period.

A 2.5% per annum rate of investment earnings is assumed by the Policy's Settlement Option tables. Under the formula for determining Annuity Unit Value, if the actual net investment earnings rate on the selected Subaccounts exceeds 2.5% per annum, variable payments increase accordingly. Conversely, if the actual earnings rate is less than 2.5% per annum, variable payments decrease.

ANNUITY RESERVE VALUE. Annuity reserve value is used in calculating transfers from variable payments to fixed payments. Annuity reserve value equals:

(1) the number of annuity units transferred from a Subaccount; times

(2) the Annuity Unit Value for that Subaccount; times

(3) the present value of $1.00 per payment period using the attained age of the payee(s) and any remaining unpaid guaranteed payments at the time of the transfer.

NO LAPSE GUARANTEE AND GRACE PERIOD

Under our No Lapse Guarantee, we guarantee that your Policy will remain in force regardless of changes in the Net Surrender Value, provided you have no outstanding Policy Debt. If the Net Surrender Value of your Policy is less than the Monthly Deduction for the next month, your Policy will enter the Grace Period. The Grace Period lasts 61 days. If the Insured dies during the Grace Period, the Death Benefit will be the amount determined as described in "Death Benefit" on pages 22-23, less any due and unpaid Monthly Deduction or other charge.

During the Grace Period, you may pay additional Premium or loan repayment without evidence of insurability to keep your Policy in force. Your payment must equal at least three Monthly Deductions. No payment is required, however. This Grace Period will begin on the day we mail notice of the Grace Period to your last known address.

If the No Lapse Guarantee is in effect under your Policy and you do not pay sufficient additional Premium or loan repayment, your Policy will remain in force, but the amount paid upon death of the Insured after the Grace Period will be limited to the return of Premium paid (less any prior withdrawals of Premium). You may restore the Specified Amount, however, by complying with the reinstatement provisions. The No Lapse Guarantee applies to your Contract unless: (a) you paid 90% of the Guideline Single Premium for your Policy or (b) your Policy has outstanding Policy Debt.

If the No Lapse Guarantee does not apply to your Policy and the Net Surrender Value of your Policy is less than the Monthly Deduction for the next month, your Policy also will enter the Grace Period, as described above. However, if you do not make the required payment, your coverage will terminate at the end of the Grace Period. You may reinstate your coverage by complying with the reinstatement provisions.

TERMINATION

The Policy will terminate and life insurance coverage will end when one of the following events first occurs:

(a) you surrender your Policy;

(b) the Insured dies or, for Survivorship Policies, the Surviving Insured dies;

(c) the Policy matures; or

(d) the Grace Period ends and there is Policy Debt outstanding.

MATURITY BENEFIT AND EXTENDED MATURITY

In certain states, if the Insured is still living and your Policy is in force on the Maturity Date, we will pay you a Maturity Benefit. The Maturity Benefit will equal the Net Surrender Value on the Maturity Date. The Maturity Date is the Policy Anniversary after the Insured's 100th birthday.

In states where approved, the Extended Maturity Rider will be issued with all Policies at no extra Premium. Under this Rider, you may choose from year to year to extend the Maturity Date for one year intervals. During the extension period, you may not take partial withdrawals or additional policy loans and the Death Benefit is the Cash Value. In addition, during the extension period, we will not charge the cost of insurance charge. We will, however, continue to charge other charges under your Policy, including the mortality and expense risk charge, even though there no longer will be a mortality risk under your Policy. We will continue to impose this charge because this charge reflects our expectations to the mortality risks and the amount of such charges expected to be paid under all Policies, including Policies covered by Extended Maturity Riders.

All other riders still active end at age 100. The tax treatment of the Maturity Benefit and the Maturity Extension rider is discussed in "Treatment of Maturity Benefits and Extension of Maturity Date" on page 38.

REINSTATEMENT

If your coverage has been reduced pursuant to our No Lapse Guarantee or has lapsed due to insufficient Cash Value (see "No Lapse Guarantee and Grace Period" on pages 27-28 above), you may reinstate coverage by complying with the conditions described below. After reinstatement, your Policy will be in force and the minimum Death Benefit will equal the Specified Amount in effect before your coverage was reduced or lapsed. To reinstate your Policy, you must apply to us within three years of the end of the most recent Grace Period and meet the following conditions:

(1) Provide evidence of insurability satisfactory to us;

(2) Pay the unpaid Monthly Deductions due during the expired Grace Period;

(3) Pay at least sufficient additional Premium to keep your Policy in force for three months; and

(4) Pay or reinstate any Policy Debt that existed at the date of lapse.

The effective date of reinstatement of a Policy will be the Deduction Day that coincides with or next follows the date on which we approve your application for reinstatement. You may not reinstate a Policy that has been surrendered. Under Survivorship Policies, if one of the Lives Insured dies during the lapse, upon payment of the reinstatement Premium the Policy will be reissued as a single life permanent policy.

The suicide and incontestability provisions will apply from the effective date of reinstatement.

CANCELLATION (FREE-LOOK PERIOD)

In many states, you may cancel your Policy by returning it to us within ten days after you receive it. In some states, however, this free look period may be longer, as provided by state law. If you return your Policy, the Policy terminates and we will pay you your Cash Value or, in some states, an amount equal to your Premium, (less any Policy Debt). We will pay the refund within seven days of receiving your request. No Withdrawal Charge is imposed upon return of a Policy within the free look period. This free look right may vary in certain states in order to comply with the requirements of state insurance laws and regulations. Accordingly, you should refer to your Policy for specific information about your circumstances.

POSTPONEMENT OF PAYMENTS

We may defer for up to fifteen days the payment of any amount attributable to a Premium paid by check to allow the check a reasonable time to clear. We ordinarily will pay any amount attributable to Separate Account Value within seven days, except:

(1) whenever the New York Stock Exchange ("NYSE") is closed (other than customary weekend and holiday closings);

(2) when trading on the NYSE is restricted or an emergency exists, as determined by the SEC, so that disposal of the Separate Account's investments or determination of the value of its net assets is not reasonable practicable; or

(3) at any other time permitted by the SEC for your protection.

We may delay payment of partial or full withdrawals from the Fixed Account for up to six months from the date we receive your written withdrawal request. We may also defer payment of any Death Benefit in excess of the Specified Amount for up to six months from the date requested if those benefits are based upon policy values that do not depend on the investment performance of the Separate Account.

CHARGES AND DEDUCTIONS

We assess charges and deductions under the Policies against the Subaccounts and the Cash Value. Additional deductions and expenses are paid out of the Portfolios' assets, as described in the Prospectuses of the Portfolios.

SEPARATE ACCOUNT CHARGES

MORTALITY AND EXPENSE RISK CHARGE. On each Valuation Date, we will deduct a charge from each Subaccount at an annual rate of 0.90% of average daily net assets for mortality and expense risks we assume.

The mortality risk assumed in relation to the Policy includes the risk that the cost of insurance charges specified in the Policy will be insufficient to meet claims and the risks under the No Lapse Guarantee. We also assume a risk that, on the Deduction Day preceding the death of an Insured, the Death Benefit will exceed the amount on which the cost of insurance charges were based. The expense risk assumed is that expenses incurred in issuing and administering the Policies will exceed the Administration Charges set in the Policy.

RESERVE FOR TAXES. We currently are not maintaining a provision for taxes attributable to the operations of the Separate Account (as opposed to the federal tax related to the receipt of Premiums under the Policies). In the future, however, we may make such a charge. Charges for other taxes, if any, attributable to the Separate Account or to this class of Policies may also be made.

MONTHLY DEDUCTION

On the Effective Date and on each monthly Deduction Day we will take a Monthly Deduction from your Cash Value. The Monthly Deduction equals the sum of the following:

(1) The monthly cost of insurance charge for the Policy; plus

(2) The monthly charge for any riders; plus

(3) The Administration Charge; plus

(4) The Tax Charge.

On each Policy Anniversary, we also will deduct the Records Maintenance Charge, if your Policy's Cash Value was less than $50,000 on the previous Policy Anniversary.

COST OF INSURANCE CHARGE. The cost of insurance charge is intended to pay for the cost of providing life insurance coverage for the Insured(s). The current cost of insurance charge differs based on whether you paid 90% or 100% of the Guideline Single Premium at issue. We guarantee that this charge will not exceed the maximum cost of insurance charge determined on the basis of the rates shown in the mortality table guaranteed in the Policy. If your initial Premium exceeds $500,000, your cost of insurance charge may be lower.

The current monthly cost of insurance charge is the lesser of:

(a) the applicable current asset-based cost of insurance rate times the Cash Value on the Deduction Day; or

(b) the applicable guaranteed cost of insurance rate multiplied by the net amount at risk on the Deduction Day.

If your initial Premium is no greater than $500,000 and you paid 100% of the Guideline Single Premium, our current asset-based cost of insurance rate for the Single Life Policies for the Standard Rating Class (NT) is 0.55% annually of Cash Value for Policy Years 1-10, and 0.25% annually of Cash Value thereafter. Our current asset-based cost of insurance rate for Second to Die Policies, when both Insureds are in the Standard Rating Class (NT), is 0.45% annually of Cash Value for Policy Years 1-10, and 0.20% annually of Cash Value thereafter.

If your initial Premium is greater than $500,000 and you paid 100% of the Guideline Single Premium, our current asset-based cost of insurance rate for the Single Life Policies for the Standard Rating Class (NT) is 0.25% annually of Cash Value for Policy Years 1-10, and 0.10% annually of Cash Value thereafter. Our current asset-based cost of insurance rate for Second to Die Policies, when both Insureds are in the Standard Rating Class (NT), is 0.20% annually of Cash Value for Policy Years 1-10, and 0.10% annually of Cash Value thereafter.

If you paid 90% of the Guideline Single Premium, your current cost of insurance rates will be higher. In addition, rates for other classes may differ based on the type of Policy and the history of tobacco use of the

Insured(s). Your guaranteed cost of insurance rates are set forth in the mortality tables in your Policy. The net amount at risk is (a)-(b), where:

(a) is the Death Benefit on the first day of the Policy Month; and

(b) the Cash Value on that day before the deduction of the Monthly Deduction for the Cost of Insurance.

Because your Cash Value and the net amount for which we are at risk under your Policy may vary monthly, your cost of insurance charge is likely to differ each month. In general, under these formulas, when your current monthly cost of insurance charge is determined using the asset-based rate, an increase in your Cash Value increases your current monthly cost of insurance charge, up to the guaranteed maximum cost of insurance charge determined as described above. Since that maximum charge is based on the net amount at risk, it declines as your Cash Value increases, unless an increase in Cash Value also would increase the Death Benefit under your Policy. Thus, if the asset-based charge would be higher than the guaranteed maximum charge, further increases in your Cash Value may reduce your current cost of insurance charge.

The cost of insurance charge covers our anticipated mortality costs for standard and substandard risks. We determine the current cost of insurance rates based on our expectations as to our future mortality experience and other factors. We may change our current asset based cost of insurance charge, but we guarantee that we will never charge you a cost of insurance charge higher than the amount determined using the maximum guaranteed cost of insurance rates shown in the Policy. We base our cost of insurance rates on the sex, issue age, Policy Year, rating class, and history of tobacco use of the Insured. However, we issue unisex policies in Montana. Our cost of insurance rates are based on the 1980 Commissioners Standard Ordinary ("1980 CSO") Mortality Table based on the Insured's sex, age last birthday, and history of tobacco use. Our cost of insurance rates for unisex Policies will never exceed a maximum based on the 1980 CSO Table B assuming a blend of 80% male and 20% female lives.

TAX CHARGE. For the first ten Policy Years, on each Deduction Day, we charge a Tax Charge equal to an annual rate of 0.40% of the average monthly Cash Value. The Tax Charge covers a portion of our state premium tax expenses and certain Federal income tax liability incurred as a result of the receipt of Premium.

We expect to recover total premium tax expenses over the life of the Policies from the aggregate Tax Charges and the unamortized state premium tax charge portion of the Withdrawal Charge. However, the amount of premium taxes differ from state to state and some states have no premium tax. Accordingly, the amount of these charges paid under your Policy may be more or less than the premium taxes that we actually pay with respect to your Policy.

ADMINISTRATION CHARGE. On each Deduction Day we will deduct the Administration Charge from Cash Value. This charge will equal an annual rate of 0.35% of average monthly Cash Value for the first ten Policy Years and 0.25% thereafter. This charge is intended to compensate us for certain administrative expenses related to the maintenance of the Policies, accounting and recordkeeping, and providing reports to Policy owners.

RECORDS MAINTENANCE CHARGE. We charge a Records Maintenance Charge of $30.00 per year on each Policy Anniversary. If you surrender your Policy during a Policy Year, we will deduct the full Records Maintenance Charge from your surrender proceeds. The Records Maintenance Charge is intended to compensate us for administrative expenses such as salaries, postage, telephone, office equipment and periodic reports. We currently waive the Records Maintenance Charge on a Policy, if the Cash Value is at least $50,000 on the previous Policy Anniversary.

PORTFOLIO EXPENSES

You indirectly bear the charges and expenses of the Portfolios whose shares are held by the Subaccounts to which you allocate your Cash Value. The Separate Account purchases shares of the Portfolios at net asset value. Each Portfolio's net asset value reflects investment advisory fees and administrative expenses already deducted from the Portfolio's assets. For a summary of current estimates of these charges and expenses, see pages 12-13 above. For more information concerning the investment advisory fees and other charges against the Portfolios, see the Prospectuses for the Portfolios, which are available upon request.

We may receive compensation from the investment advisers or administrators of the Portfolios. Such compensation will be consistent with the services we provide or the cost savings resulting from the arrangement and therefore may differ between Portfolios.

WITHDRAWAL CHARGE

If you surrender your Policy during the first nine Policy Years, we may subtract a Withdrawal Charge from the proceeds. The Withdrawal Charge will be calculated at the rate shown below. If you surrender your Policy, the Withdrawal Charge will equal a percentage of your initial Premium net of all previous withdrawal amounts on which you paid a Withdrawal Charge. The Withdrawal Charge consists of two components: a surrender charge and an unamortized state premium tax charge.

The rate used to determine the Withdrawal Charge depends on the year the withdrawal is made. The Withdrawal Charge declines to zero percent after the ninth Policy Year. The Withdrawal Charge is assessed at the following rates:

     COMPLETE                              UNAMORTIZED
   POLICY YEARS                            PREMIUM TAX    TOTAL WITHDRAWAL
ELAPSED SINCE ISSUE    SURRENDER CHARGE      CHARGE            CHARGE
-------------------    ----------------    -----------    ----------------
         1                   7.75%            2.25%            10.00%
         2                   7.75%            2.00%             9.75%
         3                   7.50%            1.75%             9.25%
         4                   6.50%            1.50%             8.00%
         5                   5.75%            1.25%             7.00%
         6                   5.00%            1.00%             6.00%
         7                   4.25%             .75%             5.00%
         8                   3.50%             .50%             4.00%
         9                   2.75%             .25%             3.00%
         9+                     0%            0.00%             0.00%

We may also charge a Withdrawal Charge on partial withdrawals. The Withdrawal Charge will apply to any partial withdrawal in a given Policy Year in excess of the free withdrawal amount described below.

Additional Premiums do not increase the amount of Withdrawal Charge you may be required to pay. Only your initial Premium is used in our formula for calculating Withdrawal Charges.

The Withdrawal Charge is imposed to cover a portion of our actual premium tax expenses and sales expenses, which include agents' sales commissions and other sales and distribution expenses. The Unamortized Premium Tax Charge, together with a portion of the monthly Tax Charge, is intended to recover our state premium tax expenses. We also expect to recover total sales expenses of the Policies over the life of the Policies. However, to the extent distribution costs are not recovered by the Withdrawal Charge, we may make up any shortfall from the assets of our General Account, which includes funds derived from the Mortality and Expense Risk Charge and other fees and charges under the Policies.

FREE WITHDRAWAL AMOUNT AND WAIVER OF WITHDRAWAL CHARGE

The free withdrawal amount in a Policy Year equals the greater of:

(a) 100% of Policy earnings not previously withdrawn; or

(b) 10% of the Cash Value, less any prior free withdrawals since the beginning of that Policy Year.

NURSING CARE WAIVER OF WITHDRAWAL CHARGE. We will waive the Withdrawal Charge if the Insured is confined to a skilled health care facility for at least 30 consecutive days. We also will waive the Withdrawal Charge after you have been released from the facility, if your request is made within 30 days of release. This waiver is described in more detail in the Policy.

DISABILITY WAIVER. We will waive the Withdrawal Charge if the Insured becomes disabled after the Policy is issued and before attaining age 65 according to the following Social Security Administration definition:

Inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.

This waiver is described in more detail in the Policy.

TRANSFER FEE

The Policy permits us to charge a transfer fee of $25 per transfer, excluding transfers under our Automatic Dollar Cost Averaging and Automatic Asset Rebalancing Programs, on each transfer after the first twelve transfers in each Policy Year. We currently do not charge a transfer fee on any transfer. We reserve the right to begin to charge the transfer fee in the future.

REDUCTION OF CHARGES

We may reduce certain charges and credit additional amounts in special circumstances that result in lower sales, administrative, or mortality expenses. For example, special circumstances may exist in connection with group or sponsored arrangements, sales to our Policy owners, sales to employees or clients of members of the Kemper group of companies, or employees and registered representatives (and their families) of broker-dealers (or their affiliated financial institutions) that have entered into selling group agreements with Investors Brokerage Services, Inc., the distributor of the Policies. The amounts of any reductions will reflect the reduced sales effort and administrative costs resulting from, or the different mortality experience expected as a result of, the special circumstances. Reductions will not unfairly discriminate against any person, including the affected Policy owners and owners of all other policies funded by the Separate Account.

GENERAL POLICY PROVISIONS

REPORTS TO OWNERS

We will maintain all records relating to the Separate Account and the Subaccounts. At least annually we will send you a report which will include information such as Premiums received, interest credited, investment experience, and charges made since the last report. The report will also show the current Death Benefit and Cash Value, as well as any other information required by statute. If you ask us, we will send you an additional report at any time. We may charge you up to $25 for this additional report. We will tell you the current charge before we send you the report.

In addition, we will send you the financial statements of the Portfolios and other reports as specified in the Investment Company Act of 1940, as amended. We also will mail you confirmation notices or other appropriate notices of Policy transactions quarterly or more frequently within the time periods specified by law. Please give us prompt written notice of any address change. Please read your statements and confirmations carefully and verify their accuracy and contact us promptly with any question.

LIMIT ON RIGHT TO CONTEST

In the absence of fraud, we may not contest the insurance coverage under the Policy after the Policy has been in force for two years after the Issue Date while the Insured is alive. The two year incontestability period may vary in certain states to comply with the requirements of state insurance laws and regulations.

If the Policy is reinstated, a new two year contestability period will apply from the issue date of the reinstatement and will apply only to statements made in the application for the reinstatement.

In issuing a Policy, we rely on your application. Your statements in that application, in the absence of fraud, are considered representations and not warranties. In the absence of fraud, we will not use any statement made in connection with the Policy application to void the Policy or to deny a claim, unless that statement is a part of the application or an amendment thereto.

SUICIDE

If the Insured under a Single Life Policy dies by suicide, while sane or insane, within two years from the Issue Date, the Death Benefit proceeds will be limited to the Premiums paid less any partial withdrawals and Policy Debt.

If the Insured dies by suicide, while sane or insane, within two years of any reinstatement, our total liability with respect to such reinstatement will be limited to the Premiums paid less any partial withdrawal and Policy Debt.

If the first death under a Survivorship Policy is by suicide, within two years of the Issue Date or date of reinstatement, whether the Insured was sane or insane, we will reissue the Policy. The new Policy on the survivor

will be a single life permanent Policy which is available at the time of reissue. The suicide provision for the new Policy will be effective as of the original Issue Date.

If the second death is by suicide, within two years from the Issue Date, whether the Insured is sane or insane, we will pay only the Premiums paid less any partial withdrawals and Policy Debt. If the second death occurs within two years after the date of reinstatement, our total liability with respect to such reinstatement will be limited to the Premiums paid less any partial withdrawals and Policy Debt.

MISSTATEMENT AS TO AGE AND SEX

If the age or sex of the Insured is incorrectly stated in the application, the Death Benefit and all Policy values will be adjusted based on what the initial Premium would have purchased using the correct age and/or sex.

BENEFICIARY

You name the original Beneficiary(ies) and Contingent Beneficiary(ies) in the application for the Policy. You may change the Beneficiary or Contingent Beneficiary at any time while the Insured is alive, except irrevocable Beneficiaries and irrevocable Contingent Beneficiaries may not be changed without their consent.

You must request a change of Beneficiary in writing. We will provide a form to be signed and filed with us. Your request for a change in Beneficiary or Contingent Beneficiary will take effect as of the date you signed the form after we acknowledge receipt in writing. Until we acknowledge receipt of your change instructions, we are entitled to rely on your most recent instructions in our files. Accordingly, we are not liable for making a payment to the person shown in our files as the Beneficiary or treating that person in any other respect as the Beneficiary, even if instructions that we subsequently receive from you seek to change your Beneficiaries effective as of a date before we made the payment or took the action in question.

If you name more than one Beneficiary, we will divide the Death Benefit among your Beneficiaries according to your most recent written instructions. If you have not given us written instructions, we will pay the Death Benefit in equal shares to the Beneficiaries. If one of the Beneficiaries dies before You, we will divide the Death Benefit among the surviving Beneficiaries. If no Beneficiary is living, the Contingent Beneficiary will be the Beneficiary. The interest of any revocable Beneficiary is subject to the interest of any assignee. If no Beneficiary or Contingent Beneficiary is living, the Beneficiary is the Owner or the Owner's estate.

ASSIGNMENT

While the Insured is alive, you may assign your Policy as collateral security. You must notify us in writing if you assign the Policy. Until we receive notice from you, we are not liable for any action we may take or payments we may make that may be contrary to the terms of your assignment. We are not responsible for the validity of an assignment. Your rights and the rights of the Beneficiary may be affected by an assignment. An assignment may result in income tax and a ten percent federal penalty tax. You should consult your tax adviser before assigning your Policy.

CREDITOR'S CLAIMS

To the extent permitted by law, no benefits payable under this Policy will be subject to the claims of your or the Beneficiary's creditors.

DIVIDENDS

We will not pay any dividend under the Policy.

NOTICE AND ELECTIONS

To be effective, all notices and elections under the Policy must be in writing, signed by you, and received by us at our Home Office. Certain exceptions may apply. Unless otherwise provided in the Policy, all notices, requests and elections will be effective when received at our Home Office complete with all necessary information.

MODIFICATION

We reserve the right to modify the Policy without your express consent, in the circumstances described in this Prospectus or as necessary to conform to applicable law or regulation or any ruling issued by a governmental

agency. The provisions of the Policy will be construed so as to comply with the requirements of Section 7702 of the Tax Code.

SURVIVORSHIP POLICIES

We offer Policies on a single life and "last survivor" basis. The Survivorship Policy operates almost identically to the Single Life Policy. The primary difference is that the Survivorship Policy has two Insureds and the Death Benefit is paid only upon the death of the last surviving Insured. Other significant differences are:

(1) the cost of insurance charge differs because we base it on the anticipated mortality of two Insureds and we do not pay the Death Benefit until both Insureds have died;

(2) for a Survivorship Policy to qualify for simplified underwriting, both Insureds must meet our standards;

(3) under a Survivorship Policy, provisions regarding incontestability, suicide, and misstatements of age or sex apply to each Insured; and

(4) the Accelerated Death Benefit is only available upon the Terminal Illness of the surviving Insured, as this term is defined in the Policy.

FEDERAL TAX CONSIDERATIONS

NOTE: The following discussion is based upon our understanding of current federal income tax law applicable to life insurance policies in general. We cannot predict the probability that any changes in those laws will be made. Also, we do not guarantee the tax status of the Policies. You bear the complete risk that the Policies may not be treated as "life insurance policies" under federal income tax laws.

In addition, this discussion does not include a detailed description of the federal income tax consequences of the purchase of these Policies or any discussion of special tax rules that may apply to certain purchase situations. We also have not tried to consider any other possibly applicable state or other tax laws, for example, the estate tax consequences of the Policies. You should seek tax advice concerning the effect on your personal tax liability of the transactions permitted under the Policy, as well as any other questions you may have concerning the tax status of the Policy or the possibility of changes in the tax law.

TAXATION OF KILICO AND THE SEPARATE ACCOUNT

KILICO is taxed as a life insurance company under Subchapter L of the Tax Code. The operations of the Separate Account are taxed as part of the operations of KILICO. Investment income and realized capital gains are not taxed to the extent that they are applied under the Policies.

Accordingly, we do not anticipate that KILICO will incur any federal income tax liability attributable to the operation of the Separate Account (as opposed to the federal tax related to the receipt of Premiums under the Policies). Therefore, we are not making any charge or provision for federal income taxes. However, if the tax treatment of the Separate Account is changed, we may charge the Separate Account for its share of the resulting federal income tax.

In several states we may incur state and local taxes on the operations of the Separate Account. We currently are not making any charge or provision for them against the Separate Account. We do, however, use part of the Policy charges to offset these taxes. If these taxes should be increased, we may make a charge or provision for them against the Subaccounts. If we do so, the investment results of the Subaccounts will be reduced.

TAX STATUS OF THE POLICY

The Policy is structured to satisfy the definition of a life insurance policy under the Tax Code. As a result, the Death Benefit ordinarily will be fully excluded from the gross income of the Beneficiary. The Death Benefit will be included in your gross estate for federal estate tax purposes if the proceeds are payable to your estate. The Death Benefit will also be included in your estate, if the Beneficiary is not your estate but you retained incidents of ownership in the Policy. Examples of incidents of ownership include the right to change Beneficiaries, to assign the Policy or revoke an assignment, and to pledge the Policy or obtain a Policy Loan. If you own and are the Insured under a Policy and if you transfer all incidents of ownership in the Policy more than three years before your death, the Death Benefit will not be included in your gross estate. State and local estate and inheritance tax consequences may also apply.

In addition, certain transfers of the Policy or Death Benefit, either during life or at death, to individuals (or trusts for the benefit of individuals) two or more generations below that of the transferor may be subject to the federal generation-skipping transfer tax.

In addition, you may use the Policy in various arrangements, including non-qualified deferred compensation or salary continuance plans, split dollar insurance plans, executive bonus plans, retiree medical benefit plans and others. The tax consequences of such plans may vary depending on the particular facts and circumstances of each individual arrangement. Therefore, if you are contemplating the use of a Policy in any arrangement the value of which depends in part on its tax consequences, you should be sure to consult a qualified tax adviser regarding the tax treatment of the proposed arrangement.

DIVERSIFICATION REQUIREMENTS. Section 817(h) of the Tax Code requires that the underlying assets of variable life insurance policies be diversified. The Tax Code provides that a variable life insurance policy will not be treated as a life insurance policy for federal income tax purposes for any period and any subsequent period for which the investments are not adequately diversified. If the Policy were disqualified for this reason, you would lose the tax deferral advantages of the Policy and would be subject to current federal income taxes on all earnings allocable to the Policy.

The United States Treasury Department (the "Treasury Department") also has issued regulations that establish diversification requirements for the investment accounts underlying variable policies such as the Policies. These regulations amplify the diversification requirements set forth in the Tax Code and provide an alternative diversification test to the provision described above.

These diversification standards are applied to each Subaccount by looking to the investments of the Portfolio underlying the Subaccount. One of our criteria in selecting the Portfolios is that their investment managers intend to manage them in compliance with these diversification requirements.

OWNER CONTROL. In certain circumstances, variable life insurance owners will be considered the Owners, for tax purposes, of separate account assets underlying their Policies. In those circumstances, the Owners could be subject to taxation on the income and gains from the separate account assets.

In published rulings, the Internal Revenue Service has stated that a variable insurance Owner will be considered the owner of separate account assets, if the Owner possesses incidents of ownership in those assets, such as the ability to exercise investment control over the assets. When the diversification regulations were issued, the Treasury Department announced that in the future, it would provide guidance on the extent to which variable Owners could direct their investments among Subaccounts without being treated as Owners of the underlying assets of the Separate Account. As of the date of this Prospectus, no such guidance has been issued. We cannot predict when or whether the Treasury Department will issue that guidance or what position the Treasury Department will take. In addition, although regulations are generally issued with prospective effect, it is possible that regulations may be issued with retroactive effect.

The ownership rights under the Policy are similar in many respects to those described in IRS rulings in which the owners were not deemed to own the separate account assets. In some respects, however, they differ. For example, under the Policy you have many more investment options to choose from than were available under the policies involved in the published rulings, and you may be able to transfer Cash Value among the investment options more frequently than in the published rulings. Because of these differences, it is possible that you could be treated as the owner, for tax purposes, of the Portfolio shares underlying your Policy and therefore subject to taxation on the income and gains on those shares. Moreover, it is possible that the Treasury Department's position, when announced, may adversely affect the tax treatment of existing Policies. We therefore reserve the right to modify the Policy as necessary to attempt to prevent you from being considered the owner for tax purposes of the underlying assets. The remainder of this discussion assumes that the Policy will be treated as a life insurance policy for federal tax purposes.

TAX TREATMENT OF LIFE INSURANCE DEATH BENEFIT PROCEEDS

In general, the amount of the Death Benefit payable under a Policy is excludable from gross income under the Tax Code. Certain transfers of the Policy, however, may result in a portion of the Death Benefit being taxable.

If the Death Benefit is not received in a lump sum and is, instead, applied under one of the settlement options, payments generally will be prorated between amounts attributable to the Death Benefit, which will be excludable from the Beneficiary's income, and amounts attributable to interest (occurring after the insured's death), which will be includable in the beneficiary's income.

ACCELERATED DEATH BENEFIT. In general, the tax treatment of an Accelerated Death Benefit is the same as the treatment of Death Benefits, as described above.

TAX DEFERRAL DURING ACCUMULATION PERIOD

Under existing provisions of the Tax Code, except as described below, any increase in your Cash Value is generally not taxable to you unless you receive or are deemed to receive amounts from the Policy before the Insured dies. If you surrender your Policy, the Cash Value (less any annual Records Maintenance Charge paid upon surrender) will be includable in your income to the extent the amount received exceeds the "investment in the policy." The "investment in the policy" generally is the total Premiums and other consideration paid for the Policy, less the aggregate amount received under the Policy previously to the extent such amounts received were excludable from gross income. Whether partial withdrawals (or other amounts deemed to be distributed) from the Policy constitute income depends, in part, upon whether the Policy is considered a "modified endowment contract" ("MEC") for federal income tax purposes.

POLICIES WHICH ARE MECS

CHARACTERIZATION OF A POLICY AS A MEC. In general, this Policy will constitute a MEC unless (1) it was received in exchange for another life insurance policy which was not a MEC, (2) no Premiums or other consideration (other than the exchanged policy) are paid into the Policy during the first 7 Policy Years, and (3) there is no withdrawal or reduction in the Death Benefit during the first 7 Policy Years. In addition, even if the Policy initially is not a MEC, it may, in certain circumstances, become a MEC if there is a later increase in benefits or any other "material change" of the Policy within the meaning of the tax law.

TAX TREATMENT OF WITHDRAWALS, LOANS, ASSIGNMENTS AND PLEDGES UNDER MECS. Because your Policy is a MEC, withdrawals from your Policy will be treated first as withdrawals of income and then as a recovery of Premiums. Thus, you may realize taxable income upon a withdrawal if the Cash Value exceeds the investment in the Policy. You may also realize taxable income when you take a Policy Loan, because any loan (including unpaid loan interest) under the Policy will be treated as a withdrawal for tax purposes. In addition, if you assign or pledge any portion of the value of your Policy (or agree to assign or pledge any portion), the assigned or pledged portion of your Cash Value will be treated as a withdrawal for tax purposes. Before assigning, pledging, or requesting a loan under a Policy which is a MEC, you should consult a qualified tax adviser.

PENALTY TAX. Generally, withdrawals (or the amount of any deemed withdrawals) from a MEC are subject to a federal penalty tax equal to ten percent of the portion of the withdrawal that is includable in income, unless the withdrawals are made: (1) after you reach age 59 1/2, (2) because you have become disabled (as defined in the tax law), or (3) as substantially equal periodic payments over your life or life expectancy (or the joint lives or life expectancies of you and your beneficiary, as defined in the tax law). Certain other exceptions to the ten percent federal penalty tax may apply.

Payments under our systematic withdrawal program possibly may not qualify for the exception from federal penalty tax for "substantially equal periodic payments" which is described above. Accordingly, this Policy may be inappropriate for Owners who expect to take substantially equal periodic payments prior to age 59 1/2. You should consult a qualified tax adviser before entering into a systematic withdrawal plan.

AGGREGATION OF POLICIES. All life insurance policies which are MECs and which are purchased by the same person from us or any of our affiliates within the same calendar year will be aggregated and treated as one policy for purposes of determining the amount of a withdrawal (including a deemed withdrawal) that is includable in taxable income.

POLICIES WHICH ARE NOT MECS

TAX TREATMENT OF WITHDRAWALS GENERALLY. If your Policy is not a MEC, the amount of any withdrawal from the Policy will be treated first as a non-taxable recovery of premiums and then as income from the Policy. Thus, only the portion of a withdrawal that exceeds the investment in the Policy immediately before the withdrawal will be includable in taxable income.

TAX TREATMENT OF LOANS. If your Policy is not a MEC, a loan received under the Policy generally will be treated as indebtedness for tax purposes, rather than a withdrawal of Cash Value. As a result, you will not realize taxable income on any part of the loan as long as the Policy remains in force. If you surrender your Policy, however, any outstanding loan balance will be treated as an amount received by you as part of the Surrender Value. Accordingly, you may be subject to taxation on the loan amount at that time. Moreover, if any portion of your Policy Loan is a Preferred Loan described in "Policy Loans" on pages 23-24, a portion of your Policy Loan

may be includable in your taxable income. Generally, you may not deduct interest paid on loans under the Policy, even if you use the loan proceeds in your trade or business.

SURVIVORSHIP POLICIES

Although we believe that the Policy, when issued as a Survivorship Policy, meets the definition of life insurance policy under the Tax Code, the Tax Code does not directly address how it applies to Survivorship Policies. In the absence of final regulations or other guidance under the Tax Code regarding this form of Policy, there is necessarily some uncertainty whether a Survivorship Policy will meet the Tax Code's definition of a life insurance policy. If you are considering purchasing a Survivorship Policy, you should consult a qualified tax adviser.

If the Owner is the last surviving Insured, the Death Benefit proceeds will generally be includable in the Owner's estate on his or her death for purposes of the federal estate tax. If the Owner dies and was not the last surviving Insured, the fair market value of the Policy may be included in the Owner's estate. In general, the Death Benefit proceeds are not included in the last surviving Insured's estate if he or she neither retained incidents of ownership at death nor had given up ownership within three years before death.

TREATMENT OF MATURITY BENEFITS AND EXTENSION OF MATURITY DATE

If your Policy does not have an Extended Maturity Rider, at the Maturity Date, we pay the Net Surrender Value to you. Generally, the excess of the Cash Value (less any applicable Records Maintenance Charge) over your investment in the Policy will be includable in your taxable income at that time. If your Policy has an Extended Maturity Rider, we believe the Policy will continue to qualify as life insurance under the Tax Code. However, there is some uncertainty regarding this treatment. It is possible, therefore, that you would be viewed as constructively receiving the Surrender Value in the year in which the Insured attains age 100 and would realize taxable income at that time, even if the Policy proceeds were not distributed at that time.

ACTIONS TO ENSURE COMPLIANCE WITH THE TAX LAW

We believe that the maximum amount of Premiums we intend to permit for the Policies will comply with the Tax Code definition of a life insurance policy. We will monitor the amount of your Premiums, and, if your total Premiums during a Policy Year exceed those permitted by the Tax Code, we will refund the excess Premiums no later than 60 days after the end of the Policy Year and will pay interest and other earnings (which will be includable in taxable income) as required by law on the amount refunded. We reserve the right to increase the Death Benefit (which may result in larger charges under a Policy) or to take any other action deemed necessary to ensure the compliance of the Policy with the federal tax definition of a life insurance contract.

FEDERAL INCOME TAX WITHHOLDING

We will withhold and remit to the federal government a part of the taxable portion of withdrawals made under a Policy, unless the Owner notifies us in writing at or before the time of the withdrawal that he or she chooses not to have withholding. As Owner, you will be responsible for the payment of any taxes and early distribution penalties that may be due on the amounts received under the Policy, whether or not you choose withholding. You may also be required to pay penalties under the estimated tax rules, if your withholding and estimated tax payments are insufficient to satisfy your total tax liability.

TAX ADVICE

This summary is not a complete discussion of the tax treatment of the Policy. You should seek tax advice from an attorney or other professional who specializes in tax issues.

DESCRIPTION OF KILICO
AND THE SEPARATE ACCOUNT

KILICO

KILICO, 1 Kemper Drive, Long Grove, Illinois 60049, was organized in 1947 and is a stock life insurance company organized under the laws of the State of Illinois. KILICO is a wholly-owned subsidiary of Kemper Corporation, a nonoperating holding company. Kemper Corporation is a majority-owned (71.67%) subsidiary of Zurich Holding Company of America ("ZHCA"), which is a wholly-owned subsidiary of Zurich Insurance Company ("Zurich"). Zurich is a wholly-owned subsidiary of Zurich Financial Services ("ZFS"). ZFS was

formed in the September 1998 merger of the Zurich Group with the financial services business of B.A.T. Industries. ZFS is owned by Zurich Allied A.G. and Allied Zurich P.L.C., fifty-seven percent and forty-three percent, respectively. KILICO offers life insurance and annuity products and is admitted to do business in the District of Columbia and all states except New York.

KILICO also acts as a sponsor for KILICO Variable Annuity Separate Account, KILICO Variable Separate Account--2 and Kemper Investors Life Insurance Company Variable Annuity Account C. The officers and employees of KILICO are covered by a fidelity bond in the amount of $20 million.