How should I compare two illustrations from different insurers?

How it works

two columns, two different documents

How to read an illustration honestly

1. 01Read the guaranteed column on its own, first
2. 02Treat the other column as an assumption
3. 03Ask which dividend scale the projection uses
4. 04Ask what changes if that scale is reduced
5. 05A projection is not a promise

Two documents from two companies share a format and little else. Guaranteed rows can be set against each other because both are obligations measured the same way. Provisions can, because both are written down. The rest was produced by a company choosing what to assume.

Building each of the two documents is the insurer's own work, not the reader's and not entirely the advisor's. Each company's actuaries set its own participation scale, its own mortality and expense assumptions, and its own loan provision, then the illustration software applies those assumptions to the specific coverage amount and funding pattern requested. A Financial Security Advisor's part is to request both illustrations on the same funding level and, where possible, the same effective date, so the numbers being placed side by side were built from the same starting instructions rather than from two different sets of assumptions about how much the household intends to deposit.

The cost or the catch

different taxation, different timing

Where retirement income comes from

1. 01Government benefits
2. 02Registered plans
3. 03Savings held outside a registered plan
4. 04Employer plans, where there is one
5. 05A business or a property, for many households

Ignoring that means paying more for a document that looked better in a meeting. A company can lift its projected column by assuming a little more and lose nothing today, since nothing attaches to the figure. The shopping test is short. Which contract is better if neither company declares another participation. Answering that question well also means being clear about what each illustration's numbers actually cost to produce, and what does it really cost sets that out from the start.

The bad news is that the company willing to assume the most about its own future participation scale will always show the largest projected column, and that has nothing to do with which company's contract is actually better priced. A scale is a board decision made year by year based on the insurer's own experience, and a scale shown today is a statement about the past, not a commitment about the future. A household that signs on the strength of the larger projected number has effectively chosen the more optimistic assumption rather than the better contract, and it will not know which choice it actually made until years of real experience have passed.

What varies between insurers, and what to ask

Beyond the participation scale itself, the two contracts can differ in their loan provision, meaning the rate charged on an advance and whether the insurer uses direct recognition against the cash value that was borrowed against, in the riders available and their cost, and in the premium schedule permitted, including how much can be added through an optional deposit. Provincial premium tax also applies to both, though the rate itself is set by the province rather than by either company, so it changes the comparison only if the contracts are issued in different provinces.

The productive question to ask each insurer, through the Financial Security Advisor handling the comparison, is for the loan provision and the riders in writing, and for a note on how the current participation scale has moved over the recent past, understood as history rather than as a forecast. Asking both companies to illustrate the identical funding pattern, rather than whatever pattern each proposed on its own, removes one variable from a comparison that already has several.

Who this matters to, and what it leaves out

different timelines, different failures

Two questions inside a succession plan

1. 01A succession planThe two run on different timelines, and they fail in different ways.
2. 02Who will lead the businessA plan covering only leadership leaves the harder one open.
3. 03Who will own the businessThe ownership question is the one that is usually left open.

This comparison matters most to a household actually choosing between two or more specific proposals before signing anything, since that is the moment the difference in assumptions has a real cost attached to it. It matters least to an owner who already holds a contract with an established insurer and is not shopping, since re running the comparison after the fact does not undo a decision already made, though that owner can still benefit from tracking their own scale's history over time.

What this page does not tell the reader is which company's future participation scale will actually turn out higher, since that outcome is not knowable in advance by either company or by this page. It also does not decide which specific contract suits a particular household's coverage need, since the guaranteed figures being compared here are only one part of that decision, and the rest of it is a judgment the Financial Security Advisor makes with the reader against the reason coverage was sought in the first place. That advisor is compensated by commission from the insurer whose contract is ultimately chosen, a fact worth keeping in view during any comparison between two proposals.

Step by step, requesting a fair comparison

The sequence for a fair comparison starts with the household, or the Financial Security Advisor on its behalf, specifying the same coverage amount and the same funding pattern to both insurers before either illustration is run. Each insurer's own system then produces its illustration independently, applying that company's own guaranteed cost of insurance schedule, its own current participation scale, and its own loan provision to the identical inputs supplied. Neither company sees the other's numbers during this process, and neither is obligated to match or beat the other, since each is simply pricing the same request according to its own book.

Once both illustrations arrive, the comparison itself is manual: someone, usually the advisor, lines up the guaranteed columns from both documents side by side, year by year, and does the same with the loan provisions and the riders. Nothing in either insurer's software performs this cross company comparison automatically, since each company's illustration tool only knows its own product. A household that receives two illustrations at different times, weeks apart, should ask for both to be dated the same day or as close to it as possible, since participation scales can change between the two dates and a stale illustration compared against a current one is not a fair comparison at all.

Where one insurer's illustration software presents its numbers using different terminology or a different table layout than the other, the substance being compared should still be lined up by what each figure actually represents rather than by where it happens to sit on the page, since two companies rarely use identical headings for the same underlying obligation. A Financial Security Advisor familiar with both companies' documents is useful here specifically because that familiarity shortens the risk of comparing a guaranteed row in one document against a projected row in the other simply because they occupy the same position on their respective pages. A comparison that stops at the guaranteed figures alone, without also lining up the underwriting offer each company actually made, can miss a difference that matters more than any number on the illustration: one insurer may have offered standard rates while the other applied a rating for the same health history, and that rating changes the real cost of the contract in a way the guaranteed column by itself does not show. Asking both insurers to confirm the underwriting class actually offered, in writing, alongside the guaranteed figures, closes that gap before a decision is made rather than after coverage is already in force under less favourable terms than expected.