he benefit illustration of a life insurance policy shows how returns on the money invested will be earned/calculated. While reading the life insurance benefit illustration, you must keep a note of the following points:
1. If the life insurance policy offers guaranteed benefits, these should be clearly marked as 'guaranteed' in the benefit illustration table.
2. If the life insurance policy offers variable benefits, then benefit illustrations should show the fund value based on two different projected investment rates of return (4 percent per annum and 8 percent per annum).
3. The rates of return mentioned in the benefit illustration are not the upper or lower limits of what you may get in reality. You may get even a higher gross yield of more than 8 percent per annum or lower than 4 percent per annum on your investment. Thus, what you get from the life insurance plan depends on the actual performance of the investment in the future.
4. In the case of ULIPs, costs are clearly spelt out. The insurer deducts charges from the premium paid each year. The policy benefit illustration shows how these costs are deducted from the total premium paid per year and only the portion of premium paid gets invested on a year-on-year basis.
5. For traditional plans like endowment plans, where the rate of return is normally guaranteed, the amount you get at the time of maturity should also be guaranteed. The policy benefit illustration shows how these mortality charges and GST are deducted from the total premium paid per year and only the portion of premium paid gets invested on a year-on-year basis.
Points to note:
- A life insurance policy illustration is a set of projections, prepared by the actuaries of the insurance company.
- The customised benefit illustration includes insurance product's name, policy term, benefit amount (maturity proceeds), the premium to be paid, etc. The illustration also includes policy riders if opted any.
