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Your policy may provide for dividends to be paid to you as either cash or "paid-up" insurance. Or it could provide for interest credits that could increase your cash value and death benefit or reduce your premium. Dividends and credits are not guaranteed. Your costs or benefits could be higher or lower than those in the illustration, because they depend on the future financial results of the insurance company. With variable life, your values will depend on the results of the underlying portfolio of investments. However, when figures are guaranteed, the insurance company will honor them regardless of its financial success. Ask your agent which figures are guaranteed and which are not. If the illustration is for a variable life policy, be sure that the interest rate assumed is reasonable for the underlying investment accounts to which you would allocate premiums. For example, a higher interest rate may be warranted if you select a stock account, while a lower rate should be assumed for more conservative alternatives.

Is a policy illustration a legal document, like a contract? No, an illustration is not a legal document. Legal obligations are spelled out in the policy itself.

What else should I look for in a policy illustration?

• Is it based on recent experience?
• Is the classification shown appropriate for me (i.e., smoker/nonsmoker, male/female)?
• When are premiums due -- annually, monthly or otherwise?
• Which amounts are guaranteed and which are not?
• Will I be notified if the non-guaranteed amounts change?
• Does the policy have a guaranteed death benefit, or could the death benefit change depending on interest rates or other factors?
• Does the policy pay dividends or provide for interest credits? Are those figures incorporated into the illustration?
• Will my premiums always be the same? Could the premium increase significantly if future interest rates are lower than the illustration assumes?
• If the illustration shows that I will not have to make premium payments after a certain period of time, is there any chance I would have to resume payments in the future?
• Is the premium level sufficient to guarantee protection for my entire life?

 

 

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