What is an IUL illustration?
An indexed universal life insurance illustration is a document that shows how a proposed policy could work under a stated set of assumptions. It usually displays planned premiums, death benefits, policy values, and costs across many policy years.
An illustration is not the policy contract. The contract is the legal agreement that defines the insurer's obligations, your rights, the policy's guarantees, and the rules that apply after issue. If wording or numbers seem inconsistent, ask how the illustration relates to the contract.
An illustration is also not a prediction. It combines guaranteed values with nonguaranteed values that depend on assumptions. Actual future policy performance may be higher or lower than the nonguaranteed figures. Payments, charges, credited interest, loans, withdrawals, and policy changes can all affect what happens.
This guide focuses on reading the document. If you need the basic policy mechanics first, begin with what an IUL is and how it works.
Start with guaranteed and nonguaranteed values
Before looking at the largest numbers, find the headings for guaranteed and nonguaranteed values. These two presentations answer different questions.
Guaranteed values use the guarantees and conditions stated for the policy. Read the nearby assumptions carefully. A guaranteed column may assume that a stated premium is paid on time, that no unshown loans or withdrawals occur, and that no policy changes are made. A label does not remove those conditions.
Nonguaranteed values are projected values that can change. They may use current charges, an illustrated crediting assumption, or other elements that are not promised for the future. Actual results may be more or less favorable.
| Item | Guaranteed column | Nonguaranteed column | Why it matters |
|---|---|---|---|
| Interest or crediting | Uses the guaranteed basis stated in the illustration. | Uses an illustrated assumption that can change. | The projected rate is not an expected return. |
| Policy charges | May use guaranteed maximum charges. | May use current charge assumptions. | Actual deductions can differ from the projected path. |
| Account value | Shows value under the guaranteed presentation and its conditions. | Shows projected value under assumptions that are not guaranteed. | Neither column should be read without its assumptions. |
| Cash surrender value | Shows the guaranteed presentation of the amount available upon surrender. | Shows a projected surrender value. | This can be lower than account value. |
| Death benefit | Shows guaranteed benefits only for the duration and conditions stated. | Shows benefits supported by projected results. | Check when each column ends. |
| Policy duration | Shows how long the policy lasts under the guaranteed presentation. | Shows projected duration under assumptions that are not guaranteed. | A long projection is not a promise of long coverage. |
Hypothetical reading example: All numbers are hypothetical. This is a reading demonstration only, not a carrier illustration, not a prediction, not a current rate, and not expected performance.
Suppose a row for policy year 20 shows a hypothetical guaranteed cash surrender value of $4,000 and a hypothetical nonguaranteed value of $38,000. The correct reading is not that the policy will produce $38,000. It is that the document shows two results under two different sets of assumptions. Your next step is to identify those assumptions and the conditions behind each column.
How to read the illustration summary
Start with the summary pages before studying the year-by-year table. Confirm that the document describes the policy you intend to review.
- Check the people and policy. Verify the proposed insured, owner where shown, insurer, product name, and issue state.
- Check the underwriting basis. An underwriting class is the insurer's health and risk category used to prepare the illustration. A different final class can change the policy's costs or illustrated values. You do not need to learn the insurer's underwriting rules to verify that the illustration uses the class actually offered.
- Check the death benefit. Note the starting amount, death-benefit option, and any planned changes. Confirm whether riders, which are optional policy benefits, are included.
- Check the premium plan. Find the planned payment amount, frequency, and number of years. A planned premium is an input used in the illustration. It is not automatically a promise that this amount will keep coverage active for life.
- Check the assumptions. Find the illustrated crediting rate or rates, account allocations, current or guaranteed charges, loans, withdrawals, and other scenarios used.
Carrier summaries do not all look alike. Use the illustration's own labels, notes, and definitions instead of expecting every document to follow one layout.
How to read the annual values table
The annual values table is often called a ledger. A ledger is the year-by-year table showing how premiums, policy values, and benefits are illustrated over time.
First, read across one row. This shows what the illustration projects at the end of one policy year. Then read down one column to see how that item changes over time. Finally, look for the year where a value becomes zero, a benefit changes, or the table stops.
| Term | What it generally means | What to verify |
|---|---|---|
| Policy year and age | The illustrated year and the insured person's age during or at the end of that year. | How the carrier defines the age shown. |
| Premium outlay | The payment the illustration assumes will be made. | Amount, timing, duration, and whether later payments change. |
| Account or accumulation value | The illustrated value inside the policy before a full surrender calculation. | The exact contract term and which deductions are already reflected. |
| Cash surrender value | The illustrated amount available if the policy is ended at that point. | Surrender charges, loans, and other deductions that may apply. |
| Death benefit | The illustrated amount payable at death before any applicable adjustments. | Whether loans, withdrawals, riders, or benefit-option changes affect it. |
| Loan balance or net distributions | Money the scenario assumes is borrowed or taken from the policy. | Timing, amount, interest assumptions, and where effects appear. |
| Guaranteed and nonguaranteed values | Separate results based on different assumptions. | Which headings and footnotes apply to each group of columns. |
Some illustrations show every policy year. Others show selected years in some sections. Column names and order vary. Read the legend and footnotes before comparing numbers.
Account value and cash surrender value are not the same
Account value, sometimes called accumulation value or policy value, is an illustrated measure of value inside the policy. Cash surrender value is the illustrated amount available if you end the policy at that point.
Cash surrender value may be lower because a surrender charge still applies. Outstanding loans, loan interest, withdrawals, or other deductions may also affect the amount. The exact calculation depends on the policy.
Hypothetical reading example: All numbers are hypothetical. This is a reading demonstration only, not a carrier illustration, not a prediction, not a current rate, and not expected performance.
Imagine one hypothetical row shows $52,000 of account value and $43,000 of cash surrender value. This does not mean every policy deducts $9,000 for the same reason. It tells you to find the surrender-charge schedule, loan information, and notes that explain the difference in this illustration.
When considering money that might be available after ending a policy, focus on cash surrender value rather than quoting account value alone.
Where policy charges appear in an illustration
Policy charges are amounts the insurer deducts under the contract. Depending on the product, they may include the cost of insurance, administrative charges, premium loads, rider charges, and surrender charges.
The cost of insurance is the ongoing charge for providing the life insurance portion of the policy. A premium load is an amount taken from a premium before the remaining amount is added to policy value. A rider charge pays for an optional benefit.
Do not expect every charge to appear in one column. An illustration may list some charges in a summary or report. Other charges may be described in footnotes or already reflected in the projected values. It may also distinguish current charges from guaranteed maximum charges.
Ask which charges are included, where they appear, which can change, and what maximums the contract allows. This page helps you locate those answers. It does not replace a detailed review of the policy's charge schedule.
How crediting assumptions change projected values
An illustrated crediting assumption is a rate or method used to calculate nonguaranteed projected values. It is not an expected return and does not promise what the policy will earn.
A higher assumption can produce much larger projected values over a long period. That is why you should compare more than the highest permitted illustrated scale. Ask to see how the same policy design looks under lower projected assumptions as well as the guaranteed presentation.
Hypothetical reading example: All numbers are hypothetical. This is a reading demonstration only, not a carrier illustration, not a prediction, not a current rate, and not expected performance.
Suppose two hypothetical scenarios use the same $8,000 annual premium and the same death benefit. One uses a 4% illustrated assumption and the other uses 6%. If the later nonguaranteed values differ greatly, the lesson is not that either result will occur. The lesson is that the projection is sensitive to an assumption that is not guaranteed.
The illustrated interest credit is also not the same as the policy's net cash-value return. Charges and policy activity still affect total value. For a focused explanation of the formula terms, see IUL caps, floors, participation rates, and spreads.
How loans and withdrawals appear in an illustration
An illustration may assume that money is borrowed or withdrawn in certain years. Look for columns or notes labeled loan, loan balance, withdrawal, distribution, or net outlay. The wording varies by carrier.
Compare the values before and after the assumed activity. Account value, cash surrender value, death benefit, and projected policy duration may change. Loan interest or a growing loan balance may also appear. Verify the amount, timing, and assumptions entered into the illustration.
Hypothetical reading example: All numbers are hypothetical. This is a reading demonstration only, not a carrier illustration, not a prediction, not a current rate, and not expected performance.
Imagine a hypothetical no-loan scenario that shows $210,000 of account value and a $500,000 death benefit in policy year 30. A second scenario assumes a $25,000 loan and shows different values in that year. Read the loan balance, cash surrender value, death benefit, and later policy years together. Do not assume the $25,000 difference explains every change.
This example teaches where to look. Loan methods and rates vary by contract, and this guide does not evaluate loan strategies, tax outcomes, or retirement-income plans.
How to compare two IUL illustrations fairly
Two illustrations are not comparable just because they show the same premium or the same projected value. First make the inputs as similar as possible. Then compare the results.
| Item to compare | Illustration A | Illustration B | Question to ask |
|---|---|---|---|
| Premium amount and duration | Record both. | Record both. | Are the same payments assumed for the same years? |
| Death benefit and option | Record design. | Record design. | Do both start with and maintain comparable coverage? |
| Underwriting basis | Record class. | Record class. | Are both based on the class actually offered? |
| Crediting assumptions | Record assumptions. | Record assumptions. | Are the projected scales comparable? |
| Loans or withdrawals | Record timing and amount. | Record timing and amount. | Do both model the same policy activity? |
| Guaranteed values | Review duration and values. | Review duration and values. | What conditions support each guarantee? |
| Nonguaranteed values | Review projected path. | Review projected path. | Which changeable assumptions drive the difference? |
| Cash surrender values | Record selected years. | Record selected years. | What would be available if the policy ended then? |
| Projected duration | Note ending year. | Note ending year. | Does either projection end before the intended coverage period? |
| Riders | List included benefits. | List included benefits. | Are different benefits or charges affecting the comparison? |
A higher projected value does not by itself prove that one policy is better. If you are still deciding whether this policy type fits your needs, review the balanced pros and cons of IUL. If the illustration assumes borrowing, read how IUL policy loans work before evaluating the projected effects.
What is an in-force illustration?
An in-force illustration is an updated projection for a policy that has already been active. It starts with information about the existing policy, then shows guaranteed and nonguaranteed values from that point forward.
A policyowner may request one after the policy has been issued and in force for the period required by applicable rules and carrier procedures. It can help show how current values, premiums, loans, withdrawals, and updated assumptions affect the projected path.
An in-force illustration still does not predict actual future performance. Check its effective date, the current policy information used, future premium assumptions, crediting assumptions, charges, and any planned loans or withdrawals.
Do not confuse it with an annual statement. An annual statement reports policy activity and values for a past period. An in-force illustration projects possible future values under stated assumptions.
Illustration details worth a closer look
These details are not proof that something is wrong. They are prompts to slow down and ask for an explanation.
- Only the highest projected values receive attention. Where are the guaranteed values and lower nonguaranteed scenarios?
- Premiums continue longer than you expected. How many years of payments does the illustration assume?
- Loans or withdrawals appear later. What amounts and timing were entered, and which later values change?
- Projected values are described as guarantees. Which exact column, benefit, or contract provision is guaranteed?
- Account value is used as available cash. What is the cash surrender value in the same year?
- A value or benefit disappears. Does the illustration show the policy ending before your intended coverage period?
- Important details are in footnotes. Which assumptions, charges, or conditions do those notes explain?
Ask for a revised scenario when an input does not match your plan. Changing the premium, death benefit, loan activity, or illustrated assumption can materially change the nonguaranteed projection.
Questions to ask before relying on an IUL illustration
- Which values and benefits are guaranteed, for how long, and under what conditions?
- Which illustrated assumptions can change after the policy is issued?
- How much premium is assumed, when is it paid, and for how many years?
- What happens under a lower nonguaranteed crediting assumption?
- Where are policy charges reflected, and which charges may change?
- Are loans or withdrawals included? If so, what amounts and timing are assumed?
- What is the difference between account value and cash surrender value in the years that matter to me?
- Does either the guaranteed or nonguaranteed presentation end before my intended coverage period?
- Which document controls if the illustration and policy wording seem different?
- For an existing policy, would an updated in-force illustration be useful?
An illustration is most useful when you understand its inputs, compare its columns, and know which values can change. It cannot tell you exactly what the policy will do in the future.
If you want help checking the assumptions in an actual document, you can request a low-pressure personalized IUL review. The goal is to understand what the illustration says and does not say, not to predict future performance.