What does an in force illustration tell me?

How it works

both failures come from one decision

How this goes wrong, named in advance

1. 01Early surrender, when the costs fall heaviest
2. 02Lapse while an advance is still outstanding
3. 03A taxable gain arriving with no cash to pay it
4. 04Funding a contract the household cannot sustain
5. 05Drawing on the contract without ever repaying

The insurer takes the contract as it stands on a given day, with the coverage actually in force, the value actually accumulated and any balance actually outstanding, and projects from there. Nothing before that day is assumed, because it no longer needs to be.

The request is made by the owner of the contract, or by someone holding written authorization from the owner, and it goes to the insurer's illustration or service unit rather than to the branch that issued the original sale. That unit pulls the current figures from its own administration system on the day the request is processed, applies the dividend scale and any other assumptions in effect on that date, and carries the arithmetic forward using the same rules the original illustration used, only starting from today's numbers instead of zero.

Nobody outside the insurer performs this calculation. A figure produced independently from the annual statement alone will not match, because the statement gives a snapshot rather than a projection, and only the insurer's own system holds the full set of current assumptions needed to carry that snapshot forward.

Turnaround is usually measured in days to a few weeks rather than months, and most insurers deliver the result as a bound or emailed set of pages formatted much like the original sales illustration, so the two documents can be laid side by side without translation. A request made by telephone alone, with nothing put in writing, is the most common reason a household waits longer than it should, since a written request gives the service unit a record to act on rather than a note taken during a call.

What can vary

five steps, and you may stop at any of them

From first conversation to a contract in force

1. A thirty minute discovery meeting, with no products
2. The suitability record a licence requires before advice
3. A design meeting, guarantees shown separately
4. Application and underwriting, decided by the insurer
5. An annual review once the contract is in force

Two insurers rarely build this document the same way. Software differs, the layout of the pages differs, and the assumptions folded into the projection, chiefly the dividend scale in effect, are each insurer's own and are reviewed and set on its own schedule rather than on a common calendar across the industry.

Contract wording changes what the illustration can even show. A contract with a paid up additions rider generates a different set of columns than one without it, and an older contract may carry rider names that no longer appear on business the same insurer issues today. The year matters as well, since the illustration always reflects the dividend scale declared for that particular year, and a scale declared five years ago is not the scale in effect now even on the identical contract.

Whether the contract is owned personally or by a corporation also changes what appears on the page, since a corporately owned contract carries figures relevant to that ownership, such as the adjusted cost basis used in a later corporate calculation, that a personally owned contract of the same design does not need to show at all.

The cost or the catch

The difference between the two documents is often read as a loss, and it is not necessarily one. Part is a scale that has moved since issue, part is money never deposited, and part is a balance drawn and left outstanding. Until those are separated, the gap says nothing about whether the contract is working.

The document itself still carries a caution worth stating plainly. Everything after today's date in an in force illustration remains a projection built on the scale in effect right now, and that scale is not guaranteed to continue at the same level. Treating the new document as a promise repeats the same error that produced confusion about the first one, only with a more recent starting point.

Requesting this document costs no money in the usual case, though some insurers charge a modest fee for more than one request in a short period, and an insurer that has stopped writing new business of that type can take longer to produce it because fewer staff still handle that product line.

The bad news, when it comes, usually shows up as a gap the household did not expect rather than as a fee. A contract with a loan left outstanding for years, or one where optional deposits stopped without anyone deciding to stop them, can produce an in force illustration that looks noticeably weaker than the original sales document, and that weaker picture is accurate rather than a mistake in the new calculation.

What to ask the insurer

if one is missing the answer is no

Four things required before anything else

1. 01Durable surplus cash flow, in an ordinary year
2. 02A horizon measured in decades rather than years
3. 03A place in the household's wider position
4. 04A clear purpose for the contract itself

Asking the insurer to separate these three sources in its answer, rather than leaving them folded into a single gap, makes it possible to know which one actually explains the difference observed. This request can be made in writing at the same time as the request for the illustration itself.

Ask as well for the specific dividend scale rate used and the date it was declared, since that single figure is what will have moved the most since the original document was prepared. A written answer naming the rate, rather than a verbal assurance that the scale is fine, is the only version worth keeping on file.

It is also worth asking who is entitled to order the document at all. The insurer will act on a request from the owner or from a person the owner has authorized in writing, and it will not act on a request from a representative acting alone without that authorization on file, regardless of how long that person has serviced the contract.

Who this matters to most

the cycle a contract is used through

Funding, drawing and repaying

1. 01Premium funds the contract on the agreed schedule
2. 02Value accumulates under the terms of the contract
3. 03The insurer advances against the cash value
4. 04Interest accrues to the insurer while a balance stands
5. 05Repayment restores the capacity that was used

A household holding an older contract, one with a loan outstanding against it, or one funded partly through optional deposits that were not made every year, has the most to gain from ordering this document. Each of those features is exactly the kind of thing an in force illustration separates out, and a statement alone will not do it.

It matters least to a household with a contract issued within the last year or two, fully funded on schedule, with no loan and no missed deposit, since there is little history yet for the projection to explain differently than the original illustration already did.

It also matters more to a household weighing a decision now, such as whether to keep paying an optional deposit or whether to draw against the contract, than to one simply keeping a record for its own sake, since a current document changes what the decision is actually based on.

What this page will not do

This page explains what the document shows. It does not say whether the dividend scale used in it will hold for the years ahead, because that decision belongs to the insurer's own board and actuaries, and the only reliable way to track it is to compare the scale named on each year's statement against the one named the year before.

Where the gap traces back to income that must now be reported, or to a balance that affects an estate or a corporate structure, the figures belong to an accountant or a lawyer rather than to this page. This site is not registered to advise on whether a household's remaining savings capacity is better placed here or inside a registered account, and it does not attempt to.

Nor does this page interpret what the projection means for a specific goal, such as retirement timing or an estate plan, since that reading depends on figures outside the contract entirely, including other assets and the household's own income. That interpretation belongs with an accountant for the numbers and a lawyer or notary where an estate or an ownership structure is involved.