How should I read a policy illustration?

By Compuquotes Team on April 19th, 2010

Q: I'm considering buying a whole life insurance policy but I'm not sure what I should be focusing on in the policy illustration from my agent. What's important and what's not?

Allan, Florida

A: Dear Allan,

First, make your agent work hard for his commission! Make him explain all the columns to you. The most important things to understand in the illustration are:

1.       The guaranteed cash value

2.       The projected cash value, and how much of your premiums are eaten up before you start building cash value

3.       The surrender charge schedule: If you want out of this policy in the future, how much will you have to pay in order to pull out your cash value?

There are also columns you needn't pay much attention to. Read about how to examine a whole life policy illustration.

Allan, one last thing, which is the most important thing I can tell you: Never buy a life insurance policy you don't understand.

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