How to read a policy illustration without getting fooled

When you are shown a policy, you are usually shown an illustration: a neat table of growing numbers stretching out twenty or thirty years. It looks like a forecast. It is not. Knowing which numbers are real and which are merely hopeful is most of what protects you.

Start with the two projection rates. Illustrations typically show your values at a lower and a higher assumed return. Neither is a promise. They are there to show a range, and the real outcome can sit below, between or above them. If a conversation leans only on the higher number, that is your cue to slow down.

Next, find the split between guaranteed and non-guaranteed. Many plans separate what you are contractually promised from what depends on future bonuses or fund performance. The guaranteed column is the floor you can actually count on. The non-guaranteed column is the hope. Read them as two different things, because they are.

Then look for the cost. Illustrations often include a figure showing the effect of charges, sometimes called the effect of deduction or the distribution cost. It tells you how much of your potential growth is going to fees over time. People skim past it. It is one of the most honest numbers on the page.

Finally, run your eye down the early years of the surrender value. In the first few years it is often well below what you have paid in. That is not a scandal, it is how these products are built, but it tells you these are long commitments, not somewhere to park money you might need soon. Read in that order, the early surrender values tell you about commitment, the cost line tells you about value, and the two projection columns tell you about hope, and you walk out of the meeting much harder to mislead.

None of this means illustrations are dishonest. It means they are sales documents doing a sales job, and you read them best with a slightly cold eye. On the cost side specifically, see what you really pay in ILP fees. And if you have an illustration in front of you and want a plain second read, book a free 30-minute review and bring it along. General information only, not financial advice.