Policy illustration

The illustration is the document an insurer issues to show how a specific indexed universal life (IUL) policy is expected to behave. It is built for one life insured, one premium pattern and one death benefit, so it is the reference point for the design, the underwriting offer and every later review.

What it shows

Policy year by policy year, an illustration sets out:

• the planned premium and the age of the life insured;
• the account value: premiums less charges, plus credits;
• the net cash surrender value: the account value less any surrender charge and loans;
• the death benefit;
• any planned loans or withdrawals.

The figures appear on more than one basis: the assumed crediting rate, and the contract's minimum crediting rates with maximum charges. These projections show how the policy works at the stated rates. They are not a forecast.

In practice

• Basis. Capital for Life uses Assumed Basis #1, the historical back-tested performance of the index strategy over the last 25 years, and Assumed Basis #2, Basis #1 less 1% a year, as a stress test. The illustrated rate entry explains how these are set.
• Column. Read the account value column, not the net cash surrender value. Before any loans, the difference between them is the surrender charge, which reduces over the surrender charge period, typically the first 10 to 15 years.
• Funding period. The longer premiums are spread to fund a policy, the more the policy takes to recover, because it supports the same death benefit throughout.
• Income. Planned loans and withdrawals are checked at Basis #2 as well as Basis #1.
• Reviews. A fresh in-force illustration at each annual review compares the policy with its design, using current caps and the credits actually received.

In an international IUL

International IUL illustrations come from the insurer and are in US dollars. They are priced on the life insured's age, gender, health, smoking status and country of residence, the death benefit and the premium pattern, and the final figures follow underwriting. The illustration shows the policy's values; how income from it is taxed depends on the policyholder's country of residence and on whether an offshore trust, a company or an individual owns the policy. To request an illustration, email quotes@capitalforlife.com.

Common questions

Are IUL illustrations accurate?

An illustration is accurate arithmetic on stated assumptions. Real credits vary each year between the floor and the cap, and the insurer can change caps and charges within the contract, so actual values will differ. The stress-test basis shows how much room the design has.

What is the difference between account value and cash surrender value?

The account value is the policy's value before surrender charges. The net cash surrender value is what the policyholder would receive on surrender: the account value less any surrender charge and outstanding loans. Once the surrender charge period ends, the two differ only by any loans.

How often should an IUL illustration be updated?

At least once a year, and after any change in premiums, loans, ownership or circumstances. Each annual review compares the policy with its design assumptions and adjusts the premium, allocation or income plan.

Go deeper: how IUL works and request an illustration.