How to Present a Life Insurance Illustration

A life insurance illustration is the ledger a carrier produces to show how a policy could perform over time. For permanent products it is often the most persuasive page in the sale, and also the page most likely to be misunderstood. Clients see a column of rising cash values and assume it is a promise. It is not, and the rules that govern illustrations exist mostly to make that clear.

This guide walks through a practical workflow for running, presenting, and filing a life insurance illustration so the client understands what they signed and the case file holds up later.

What a life insurance illustration is

The NAIC Life Insurance Illustrations Model Regulation defines an illustration as “a presentation or depiction that includes non-guaranteed elements of a policy of life insurance over a period of years.” It names three types:

• Basic illustration: “a ledger or proposal used in the sale of a life insurance policy that shows both guaranteed and non-guaranteed elements.”

• Supplemental illustration: an additional presentation that may use a different format but can only show a scale already permitted in the basic illustration.

• In force illustration: one “furnished at any time after the policy that it depicts has been in force for one year or more.”

The model is a template that states adopt in their own form, so check your state’s version and each carrier’s compliance guide. The model also carves out certain products, including variable life, annuities, credit life, and policies with no illustrated death benefit on any individual above $10,000. Many final expense sales fall under that last threshold, which is one reason illustrations show up mostly on larger permanent cases.

Step 1: Run the illustration on the right inputs

Before anything else, confirm the inputs match the case you expect to place. The model requires each illustration to be labeled “life insurance illustration” and to show basic information, including:

• the insurer’s name

• the producer’s name and business address

• the proposed insured’s name, age, and sex

• the underwriting or rating class the illustration is based on

• the generic policy name, product name, and form number

• the initial death benefit

• the dividend option or how non-guaranteed elements are applied, if any

The rating class line deserves the most attention. If you illustrate Preferred and the case is likely to come back Standard or rated, the numbers will change at issue. Our guide to life insurance underwriting classes covers how to set expectations before you run the ledger.

Step 2: Present guaranteed and non-guaranteed side by side

The model requires a numeric summary shown “for at least policy years five (5), ten (10) and twenty (20) and at age 70, if applicable,” on three bases: policy guarantees, the insurer’s illustrated scale, and a midpoint scale with non-guaranteed elements reduced. Walk the client through all three columns, starting with the guaranteed one.

It also requires a statement in substance that the illustration “assumes that the currently illustrated nonguaranteed elements will continue unchanged for all years shown. This is not likely to occur, and actual results may be more or less favorable than those shown.” Read that sentence out loud. It is the single most useful line in the document for setting expectations.

If coverage would end before maturity or age 100 on any basis, the model says the year coverage ceases must be identified for each of the three bases. Point to that year directly. Clients rarely find it on their own.

Step 3: Avoid the prohibited phrasing

The model lists what a producer may not do when using an illustration. Several of these are easy to slip into in conversation:

• state or imply that non-guaranteed elements are guaranteed

• describe non-guaranteed elements in a way that is misleading or has “the capacity or tendency to mislead”

• give the applicant an incomplete illustration

• suggest premiums will not be required each year to keep the illustrated death benefit, unless that is the fact

• use “the term ‘vanish’ or ‘vanishing premium,’” or a similar term implying the policy becomes paid up

A good habit is to say “currently illustrated” every time you mention a non-guaranteed number. It keeps your language honest and matches the document. For background on how cash value actually builds, see what cash value is in life insurance.

Step 4: Get the signatures and submit with the application

Under the model, the applicant signs and dates a statement substantially similar to: “I have received a copy of this illustration and understand that any non-guaranteed elements illustrated are subject to change and could be either higher or lower. The agent has told me they are not guaranteed.” The producer signs a matching statement.

If the policy is applied for as illustrated, a signed copy goes to the insurer with the application and a copy goes to the applicant. If no illustration was used, or the policy is applied for other than as illustrated, the producer certifies that in writing on the insurer’s form and the applicant acknowledges that a conforming illustration will be provided no later than delivery.

Keep these pages with the application in the case file. Our case file documentation guide shows how to organize them so a later review is quick.

Step 5: Handle the revised illustration at delivery

Cases often issue differently than applied for, especially when the rating class moves. The model says that if a policy “is issued other than as applied for, a revised basic illustration conforming to the policy as issued shall be sent with the policy.” It must be labeled “Revised Illustration” and signed and dated by the policy owner and the producer no later than delivery.

Treat the revised illustration as part of your delivery checklist, not an afterthought. Compare it to the original with the client and explain what changed and why. The policy delivery workflow covers the rest of that meeting.

Step 6: Use in force illustrations at every review

The model requires insurers to send an annual report for illustrated policies. If that report does not include an in force illustration, it must carry a notice telling the owner they “should not consider replacement of your policy or make changes in your coverage without requesting a current illustration,” and that they may request one annually without charge. It adds that if the owner does not receive one “within 30 days from your request, you should contact your state insurance department.”

That makes the in force illustration the natural starting point for an annual review, and an essential step before any replacement discussion. Order a current one before you sit down with the client, and compare it to the original ledger so you can show where performance has tracked and where it has not.

Common illustration mistakes to avoid

• Illustrating the best class by default. Run the class you realistically expect, and show a second ledger if the case could go either way.

• Skipping the guaranteed column. It is the only column the carrier is promising.

• Losing the signed pages. The model has insurers keep the signed illustration until three years after the policy is no longer in force. Keep your own copy too.

• Treating the illustration as a comparison tool across carriers. Each carrier builds its illustrated scale its own way, so side-by-side ledgers from different companies are not apples to apples.

The bottom line

A life insurance illustration is a disclosure document as much as a sales tool. Run it on realistic inputs, lead with the guarantees, use “currently illustrated” language, collect the signatures, and revisit it with an in force illustration at every review. That workflow protects the client’s understanding and your file.

Peach Pilot supports licensed agents’ workflow. Carriers make final underwriting and issue decisions.