How do I read my annual policy statement?

How it works

and what does not change at all

What changes from one province to another

1. 01The regulator that licenses the agent
2. 02The titles an advisor may lawfully use
3. 03The cost of settling an estate
4. 04The contract itself does not change
5. 05The federal tax treatment does not change

A statement is the account of a year that has finished. It gives the coverage in force at the closing date, the value standing behind it, what was declared for the year and where that amount went, and anything owed back. Each is a different question, and the page confuses because all four are printed as money.

The insurer's own administration system produces the statement automatically, once a year, timed to the contract's anniversary date rather than to the calendar year, which is why the period covered rarely matches what a reader expects from a tax slip or an account statement. Where the contract is owned by a corporation rather than an individual, the statement is addressed to the corporation, and the figures a director or an accountant needs to read from it are not always the same four the owner would circle on a personally held contract. How the four figures are labelled, and in what order they appear on the page, differs from one insurer to the next, since no single template is imposed on the industry.

The cost or the catch

The figure read first is the largest, and it is the one you cannot have. The amount payable at death is not spendable. What is reachable today is the surrender value, less any balance outstanding and less the tax on the way out.

Two further consequences are easy to miss. Ending the contract to reach the surrender value can itself create taxable income, measured against the contract's adjusted cost basis rather than against the premiums paid, so the number on the statement is not the number that lands in an account after the fact. And where an amount has been advanced against the contract, interest keeps accruing on it whether or not the statement's front page happens to draw attention to that balance, which means the surrender value printed can overstate what is actually left once the outstanding amount is subtracted.

What to compare year over year

conceded before anything is answered

What the critics get right

1. 01Early cash value is low against the premium paid
2. 02The commitment is long and costly to abandon
3. 03Costs are not disclosed line by line
4. 04A household without durable surplus has cheaper places to hold money
5. 05The comparison usually offered is the wrong comparison

Keeping last year's statement beside the most recent one makes it possible to see whether the gap between the four figures is moving as expected, rather than reading each statement in isolation. A figure that moves backward from one year to the next is worth a question to the insurer before the following year, not after. Whether a rider can be added later to change the trajectory of a lagging figure is covered in can I add a paid up additions rider to a policy I already own.

A figure that has flattened rather than fallen deserves the same question asked of a figure that has dropped outright, since a flat line sometimes means a declared amount was directed somewhere other than where it was directed the year before, and that redirection is a choice the owner made, or can unmake, rather than something the contract decided on its own.

What varies by insurer, province and year

read one illustration as two documents

What is guaranteed, and what is not

1. 01Cash valueGuaranteed: Set out in the schedule at issue. Not guaranteed: Projected totals, which assume the current scale holds.
2. 02Death benefitGuaranteed: Guaranteed, subject to the contract terms. Not guaranteed: Anything the declared dividends add to it.
3. 03The annual decisionGuaranteed: A level premium, fixed by the contract. Not guaranteed: Dividends, declared annually and never guaranteed.

How a statement looks also depends on where the contract was issued and which insurer administers it. A corporately owned contract in Quebec may carry disclosure obligations tied to the Civil Code and to the corporation's own fiscal year that a personally owned contract in another province never sees, and the professional reading the statement changes with it: a CPA reviewing a corporate file is asking a different question of the same four figures than an individual owner reading the same statement at the kitchen table. Insurers also differ in how often they update the format itself, so a household holding contracts from two different companies can receive two statements that look nothing alike despite reporting the same four underlying figures, simply because each company redesigned its own template on its own schedule.

The year matters as much as the company. A statement produced this year reflects whichever dividend option, riders and outstanding balances are on file today, and comparing it to a statement from a decade ago is only meaningful once the reader accounts for every change made to the contract in between, an optional deposit added in one year, a rider dropped in another, an advance taken out and partly repaid in a third. None of that history is repeated on the current statement itself; it survives only in the insurer's own file and in whatever copies the owner kept, which is one more reason older statements are worth keeping rather than discarding once the newest one arrives.

Two more sources of difference are worth naming plainly. A contract that has changed hands, moving from one owner to another through a gift, an estate settlement or a corporate reorganization, can carry a statement whose historical figures reflect decisions made by someone no longer connected to the file, and the current owner inherits the numbers without necessarily inheriting the reasoning behind them. And a statement issued shortly after a contract change, a rider added, a dividend option switched, an advance taken, often looks unusually different from the year before simply because of that one change, not because anything about the underlying contract has gone wrong.

What to ask, and of whom

The insurer's service department is the right first call for anything the statement itself does not explain, and a specific request works better than a general one: asking for a written definition of each of the four figures, in the insurer's own terms, turns a document full of similar sounding numbers into four separate and answerable questions.

Where a figure has moved in a way the insurer's explanation does not fully account for, taking that statement to the representative servicing the contract, or asking the insurer directly for the history of scale declarations behind it, moves the question from a guess to something a professional with access to the full file can actually answer.

Who this matters to most

nobody can promise you approval

What the insurer can decide

1. Accept the application as it was made
2. Rate it, and issue at a higher premium
3. Exclude a stated cause from the coverage
4. Postpone the decision until a later date
5. Decline the application altogether

This matters most to an owner who has stopped reading the statement as a matter of habit, since small drifts compound quietly over years precisely because nobody is comparing this year's page to last year's, and to a corporation that owns a contract as a funding vehicle for a buy sell agreement or a key person need, since the figures that matter to a board are not the ones a personal owner would read first.

It matters less to an owner still early in a contract's life, where the four figures are closer together and a year's drift is smaller in absolute terms, and less again to an owner whose contract carries no optional deposits and no outstanding advance, since two of the four figures then have little left to move.

What this page will not tell you

This page describes what the four figures mean in general. It does not, and cannot, say whether a specific movement on a specific statement is normal for that contract's design, because that judgment depends on the contract's own guaranteed table and dividend option, not on a description written for every reader at once.

That judgment belongs to the representative servicing the contract, or to the insurer's own service department when no representative is currently assigned, and a CPA where the question turns on tax rather than on the contract itself.