Life Insurance Illustrations

Policy illustrations are the insurance company's projections for a policy's performance in future years. Typically these are not guaranteed and often exaggerate the financial success of an investment. However, if you understand the fallibility of these insurance illustrations, you can use them to your advantage.


This page:

Explains life insurance illustrations.

Advises how to make biased life insurance projections useful.

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Conservative projections

Instead of comparing the hundreds of figures contained in these illustrations we suggest you request two specific life insurance illustrations from each prospective policy's insurance company.

Ask for an insurance illustration using the current interest rate throughout the entire life of the policy and another using an interest rate 2% lower than the current rates. Often, the projections illustrated with these two figures are very revealing.

First, compare the two illustrations provided by each company. If the projections vastly differ with the two percent decrease in interest rates, you should be wary. This is often an indicator that the company is unreliable and your investment in them may not pay off as much as you think it will.

The less the two insurance illustrations vary the more conservative the company is and the more likely their predictions will be accurate.

After weeding out a few prospective companies using that comparison, compare the insurance illustrations of the remaining companies to each other. Again, the most conservative projections are most likely more reliable.

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Insurance rate guarantees

Term life insurance illustrations and permanent life insurance illustrations differ in content so it is difficult to really assess which company is better if you are comparing two different policy types.

Term insurance illustrations display the maximum premiums for each year, the total premiums paid for that year and each year's death benefits. These figures are pretty concrete, while permanent life insurance relies heavily on economic trends.

Instead of blindly comparing figures between these two types of policies, find out how many months the insurance company guarantees their insurance rates. Normally rates are guaranteed anywhere from 3 to 12 months - the longer a company offers a guarantee the better. An insurance company offering no guaranteed insurance rates should make you raise an eyebrow and question its financial stability.