- Seeing Into The Future of Your Life Insurance Policy With An In-Force Illustration
- February 15, 2017
Can you judge the likely future performance of your life insurance policy? According to our expert insider, Tony Steuer, you can do just that…
by Tony Steuer
An in-force illustration is the only way to gauge the potential future performance of a policy by using actual values and current assumptions (i.e., actual interest rate, current mortality and expense factors) to produce a current policy illustration. It allows you to compare past (actual) performance with anticipated performance.
Life insurance agents use in-force illustrations to help demonstrate how a policy may perform; but, keep in mind, that these projections may be different than what actually happens.
With an in-force illustration, a policy owner can evaluate the performance of the policy to date and project how the policy may perform in the future. If you see a dramatic difference in the potential performance of your policy and the actual performance, there may be more than meets the eye.
Bottom line? What this means is that you may need to press your agent or someone at the company to resolve an issue like this. In other words, you’re using actual performance as a measure – rather than the original projections – in the sales illustration generated at the time of purchase.
An illustration like this can be requested from the life insurance company. It can take anywhere from a couple days to a few weeks to receive one, and they should be reported annually – or at least every other year – to assure that your policy is meeting the initial objective goals.
The in-force life insurance illustration is used to gauge the potential performance of a policy, and this type of illustration is available for all permanent (cash value) life insurance policies, at least where the policy and it values are not fully guaranteed.
Sample request forms for an in-force ledger illustration for a universal life policy can be found here, and depending on your situation, you can also ask for other in-force illustrations.
Here’s an example; if the policy was originally designed on a limited premium payment schedule, you can request the company to furnish an in-force illustration to determine how many more years the premium will actually need to be paid. Keep in mind that every life insurance company has their own way to formatting an in-force illustration.
~ Tony Steuer
Due to many abuses and the need to provide a greater degree of consumer protection, in-force illustrations became greater in length and now provide significantly more information than in years past. Keep in mind that, for the most part, every company’s illustration is different as are each of their products, and that’s by necessity.
Permanent cash value policies have non-guaranteed variables which may be subject to change over time, including interest rates, varying investment results and the cost of insurance charges. All of these variables will certainly have a dramatic impact on how effectively a policy will perform in the future, so pay attention.
In-force illustrations are also called an “in-force ledger,” and they show an existing life insurance policy’s future premiums, cash values and death benefits. By law, policyholders usually have the right to request at least one in-force illustration – and without charge – every year. While the informational quality of these in-force illustrations can vary, some are exceptionally useful and feature hybrid designs.
If you run into problems getting your agent and/or insurance company to help with such requests, you can get assistance from a life insurance analyst or consultant, through your state’s Department of Insurance or you can email me at firstname.lastname@example.org.
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Tony Steuer has led the way in establishing a path for Insurance Literacy through his award-winning books like Questions and Answers on Life Insurance: The Life Insurance Toolbook and The Questions and Answers on Life Insurance Workbook. Both were graced with the “Excellence in Financial Literacy (EIFLE) Award” from the Institute of Financial Literacy.
Tony also offers resources for educating and connecting consumers and professional insurance agents through simple answers to complex questions on insurance, and he’s the founder of the Insurance Literacy Institute and creator of The Insurance Bill of Rights.
Tony has contributed to interviews for New York Times, Washington Post, U.S. News & World Report, Slate.com, BottomLine Personal, BankRate.com, Insure.com, InsuranceQuotes.com, Mint.com, You and Your Family and BenefitsPro.com, and he’s appeared as a guest on the Wall Street Journal Morning Radio Show, Prudent Money Show, Your Financial Editor, Insider Secrets, Suzy G. in the Morning Show, Financial Finesse, GrowingMoney.com, Nolo.com, TheNest.com, LovetoKnow.com, and LifeInsuranceSelling.com.
About Tony Steuer
Noted insurance author Tony Steuer has spent over 25 years in the life insurance industry. Steuer’s leadership roles include serving on the California Department of Insurance Curriculum board and the National Financial Educator's Council Curriculum Advisory Panel as well as having served as President of the San Francisco Chapter of the American Society of CLU & ChFC, President of the leading Life Insurance Producers of Northern California, and as a board member of the San Francisco Life Underwriters Association. Mr. Steuer is the author of Questions and Answers on Life Insurance: The Life Insurance Toolbook, The Questions and Answers on Life Insurance Workbook and The Questions and Answers on Disability Insurance Workbook - the first two were awarded the “Excellence in Financial Literacy (EIFLE) Award from the Institute of Financial Literacy. Steuer holds a Chartered Life Underwriter (CLU) designation and also holds the Life and Disability Insurance Analyst License, a designation that is held by less than thirty people in California.
Questions & Answers on Life Insurance by Tony Steuer, CLU, LA, CPFFE is licensed under a Creative Commons Attribution 3.0 Unported License.