Policy Illustration
The insurer's year-by-year projection of a policy's premiums, cash value, and death benefit — part guarantee, part educated guess, all assumptions.
A policy illustration is the multi-page ledger an insurer produces showing how a policy is expected to behave year by year: premiums in, Cash Value growth, Death Benefit over time. Every permanent policy is sold with one, and every serious policy decision should start with one.
Read the columns, not the summary. The guaranteed column shows the contractual floor: minimum interest, maximum charges, zero dividends — the worst case the insurer can legally deliver. The current/non-guaranteed column projects today's dividend scale or crediting rate continuing unchanged for decades — which it won't, in either direction. Reality lands between the columns; the guaranteed column is the only promise.
Illustrations are where product differences become visible. Whole Life Insurance illustrations are comparatively tame — guarantees do the heavy lifting and dividends add on top. Indexed Universal Life (IUL) illustrations are where regulators keep intervening (AG 49 and successors) because illustrated crediting rates and loan arbitrage were routinely painting fantasy retirements; stress-test any IUL at 2–3% below the illustrated rate before believing it. For Infinite Banking designs, the tell is early cash value: a max-Paid-Up Additions (PUA) design shows high first-year cash value relative to premium, a commission-heavy design shows years of near-zero.
The in-force illustration — requested from the insurer for a policy you already own — is the annual physical for existing coverage. It reveals whether a Universal Life Insurance contract is quietly heading toward collapse, what dividend changes did to projections, and whether exits like a 1035 Exchange or reduced paid-up (see Non-Forfeiture Options) beat staying the course. Owners of UL policies especially should pull one every few years; the bad news arrives much cheaper early.
An illustration is a model, not a contract — the policy is the contract. Use illustrations to compare designs honestly, at matching assumptions, and let the guaranteed column set your expectations.
Related terms
Whole Life Insurance
Permanent life insurance with a guaranteed death benefit, fixed premiums, and a cash value account that grows at a guaranteed rate — for your whole life, not a set term.
Read moreIndexed Universal Life (IUL)
Universal life insurance whose cash value interest is tied to a market index like the S&P 500 — with caps on gains and a floor against losses.
Read moreUniversal Life Insurance
Permanent life insurance with flexible premiums and an interest-earning cash account — flexibility that shifts risk from the insurer to you.
Read moreDividend (Life Insurance)
A share of a mutual insurer's profits paid to whole life policyholders — not guaranteed, but paid by top mutuals every year for over a century.
Read more1035 Exchange
A tax-free swap of one insurance policy for another under IRS Section 1035 — move to a better policy without triggering taxes on the gains.
Read moreSee how policy illustration fits your situation.
A Fit Call is a conversation, not a pitch. Bring your questions — leave knowing whether the strategy fits your numbers.