A life insurance policy illustration is a text-and-graphics presentation of how a life insurance policy will perform at a selected interest rate, with an assumed number of predetermined premium payments and a “current” and “guaranteed” cost of insurance and expenses. A life insurance policy illustration is not a legal document—legal obligations are contained in the policy itself.
What Does the Illustration Show?
A policy illustration shows items such as policy premiums, death benefits, cash values, and other information that can affect your cost of buying insurance. Some of the figures in the illustration are guaranteed, while others are projections and may depend on the future financial results of the insurance company. The illustration shows how your policy would perform in the future under a set of assumptions.
Guaranteed Items
The policy illustration contains some figures that are guaranteed. The insurance company will honor these figures regardless of the policy’s future financial experience. What is guaranteed will depend on the type of life insurance policy. A whole life insurance policy will guarantee the premium, cash value, and death benefit. A universal life insurance policy will guarantee a minimum interest credit on the cash value. A variable universal life insurance policy will guarantee the death benefit, provided a maximum premium is paid. In all cases, the company will guarantee a maximum that it will charge for expenses and mortality charges. (Keep in mind that guarantees are based on the claims-paying ability of the issuing insurance company.)
Nonguaranteed Items
The policy’s performance projections are based on the insurance company’s assumptions about future performance many years into the future. Like any other assumption, actual results will be more or less favorable, and the longer the time period being projected, the greater the likelihood of variance from the predicted values. The policy pricing factors that contain elements of uncertainty again depend on the type of life insurance policy. They include future dividend rates on whole life policies that are determined by the performance results of the company’s investment portfolio, the interest credited to a universal life policy cash value, and performance of the pool of subaccounts available to choose from in a variable life insurance policy. In all cases, the company’s “current” future expenses and mortality costs will be subject to change.
Note: Variable life insurance policies are offered by prospectus, which you can obtain from your financial professional or the insurance company issuing the policy. The prospectus contains detailed information about investment objectives, risks, charges, and expenses. You should read the prospectus and consider this information carefully before purchasing a variable life insurance policy.
If you have questions, contact the Experts at Henssler Financial: experts@henssler.com or 770-429-9166.
Disclosures
The following information is reprinted with permission from Forefield, a division of Broadridge Financial Solutions, Inc. This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
