Issue link: http://clhia.uberflip.com/i/405151
20 THE IMPORTANCE OF YOUR AGENT The policy illustration shows different cost-related features (cash values, dividends, death benefits, premiums) at various durations of the policy. Some of these features are not guaranteed (such as dividends) or may be tied to investment returns (such as some components of universal life policies). A policy illustration is just that - an illustration, designed to show you how the policy would work given a certain set of assumptions. If those assumptions change, the policy would perform differently. The illustration is not a legal document. Your policy contract is. Questions to ask about the policy illustration: • Are the premiums used in the illustration guaranteed? Could they fluctuate and under what circumstances? • The illustration will probably show policy dividends (if applicable) at the level currently being paid by the insurance company. What would happen to the performance of your policy if dividends fell? If dividends rose? • Is the death benefit guaranteed? If not, what factors is it tied to? • If there is an investment component to the policy, what rate of return is assumed? What would happen to the performance of the policy if the rate of return were lower? If it were higher? What you should know about policy illustrations Comparing the values of one policy with another can be difficult, especially given the different features and characteristics each may have. But here are some pointers should you decide to make comparisons: • Comparing term policies is relatively straightforward, provided that the parameters are the same (e.g., $150,000 five-year renewable term insurance for a 37-year-old female non-smoker). Compare what the premium is today for each policy, but also add up what the premiums will be over a 20- or 30-year period. Renewal increases can vary significantly between policies. • Use present value to calculate what all future premiums would cost in today's dollars. The computer software that many agents subscribe to can do this. • Comparing permanent policies with other permanent policies is more difficult. Are the policies participating or non-participating? What features are guaranteed? What interest assumptions are made? Comparing policies