In-Force Illustrations: What They Show and How to Request One

An in-force life insurance illustration is a free, year-by-year projection from your insurer showing whether your existing permanent policy will carry its death benefit for your lifetime or run out of money first. It uses today’s cash value, today’s crediting rates, and today’s internal charges rather than the optimistic assumptions printed in the sales illustration you got when you bought the policy. You can request one once a year at no cost, and the insurer has 30 days to deliver it.¹

What the Illustration Actually Tells You

The format follows the NAIC Life Insurance Illustrations Model Regulation, which most states have adopted. You get detailed tables running from the current policy year out to age 100 or the policy’s maturity date, with the key numbers broken out side by side.²

Guaranteed and Non-Guaranteed Columns

Every illustration shows two sets of values. The guaranteed column projects the worst outcome the contract permits: the minimum interest the insurer is required to credit paired with the highest mortality and expense charges the contract allows. If the policy survives there, it survives anywhere. The non-guaranteed column uses current rates and current charges, projecting what happens if today’s conditions simply continue.² The space between those two columns tells you how much of your coverage depends on assumptions that could change.

Loans and Rising Insurance Costs

If you have borrowed against the policy or taken withdrawals, the surrender values on the report are shown net of outstanding loans and accrued loan interest.² Loan interest compounds inside the contract each year, and seeing that trajectory laid out often reveals that a loan the owner considered manageable is on track to collapse the policy within a decade.

The illustration also breaks out the internal cost-of-insurance charges deducted each year. Those charges rise with age. The projection shows those rising costs against your projected cash value, which is how you can tell whether the money inside the policy will keep pace with the money being taken out of it.¹

How It Differs From Your Annual Statement

For any policy sold with an illustration, the insurer must automatically mail you an annual report showing beginning and ending values, premiums paid, interest credited, charges deducted, the current death benefit, surrender value, and any outstanding loan.¹ That is a backward-looking snapshot. It tells you where you are, not where you are headed.

An in-force illustration starts from that snapshot and projects it forward, year by year, under the assumptions you choose. It is the document that tells you when the cash value hits zero, when premiums need to increase, and whether the death benefit holds through age 100. If the annual report you receive does not already include a forward projection, the regulation requires it to carry a prominent notice telling you that you can request one for free.¹

Why Policy Type Changes the Stakes

Whole life insurance locks in level premiums and a guaranteed cash value growth rate. Dividends from a mutual insurer can add to the cash value but are not guaranteed. The guaranteed column on a whole life illustration tends to look steady because the contract holds the key variables in place. For a well-funded whole life policy, the illustration is usually reassuring.

Universal life is the opposite story. These policies are sensitive to both the interest crediting rate and the premiums the owner actually chooses to pay. Flexible premium payments combined with crediting rates that have fallen well below what the original sales illustration assumed produce a shortfall that compounds silently. When the cash value can no longer absorb the rising cost-of-insurance charges, the policy lapses. Indexed universal life adds another layer because the crediting rate depends on index performance subject to caps and floors.

If you own a universal life policy that is more than ten years old, treat the in-force illustration as the single most important document for determining whether your coverage will exist when your family needs it.

How to Request One

Call your insurer, use the policyholder portal, or send a request form to the home office. Have your policy number ready and be prepared to verify your identity as the owner. A financial advisor or agent can submit the request for you with written authorization. The insurer should produce the illustration within 30 days; if it does not, the model regulation points you to your state insurance department.¹

Which Scenarios to Ask For

A standard request produces an illustration based on the insurer’s current assumptions. Ask for more than that. Specifying the scenarios up front saves a second request later.

A guaranteed-only projection, which shows the absolute floor under the contract.
A mid-point projection using an interest rate halfway between the guaranteed minimum and the current rate.
A reduced paid-up scenario showing what death benefit your current cash value could fund if you stopped paying premiums today.
An increased premium scenario showing how much additional premium would be needed to keep the policy in force through a specific target age.

How Often

For universal life, request a fresh illustration every year or two, particularly if the policy was issued when interest rates were higher than they are now. Whole life policies with guaranteed values need less attention, but check in every three to five years, and sooner if you have taken loans or changed your dividend option. Always pull a new illustration before borrowing against the policy, changing the death benefit, or making a retirement decision that affects premium payments.

What to Do If the Illustration Shows a Problem

The most common finding on an older universal life illustration is that current funding is not enough to carry the death benefit to life expectancy. The practical responses:

Increase premium payments by the amount the illustration shows is needed to keep the policy in force to your target age.
Reduce the death benefit so the cost-of-insurance charges fall and the cash value drain slows.
Drop riders you no longer need, such as waiver of premium or accidental death benefit, to free up cash inside the policy.
Execute a 1035 exchange into a healthier contract. Federal tax law allows swapping a life insurance policy for another life policy, an endowment, an annuity, or a qualified long-term care contract without triggering a taxable event, provided the exchange moves to an equal or broader category. You cannot exchange an annuity back into life insurance.³
Consider a life settlement if you no longer need the coverage. Offers depend on your age, health, and the policy’s terms, and state regulation of life settlements varies.⁴
Surrender the policy for its remaining cash value, understanding the tax consequences first.

The Tax Trap When a Loaned-Up Policy Lapses

When a permanent policy is surrendered or lapses, the IRS treats any gain as ordinary income. The gain is the amount you receive or are credited with, minus your investment in the contract (total premiums paid, reduced by any tax-free amounts you previously received).⁵

If the policy lapses with an outstanding loan, the discharged loan balance counts as part of the proceeds. The insurer will issue a 1099-R for the full amount, including the loan balance, even though no cash reaches your hands. Say you paid $80,000 in premiums over the life of the policy, took $60,000 in loans, and the policy lapses with a cash value of $120,000. The insurer reports $120,000 in gross proceeds. Your taxable gain is $40,000 in ordinary income, even though you walked away with nothing.⁵

An illustration that projects a lapse is therefore also a tax warning. Addressing it while you still have options is very different from receiving a 1099-R after the fact.

Reading the Numbers the Right Way

Treat the non-guaranteed column as a projection, not a promise. Run the guaranteed-only scenario first, because it answers the only question that truly matters: can this policy survive the worst conditions the contract allows? If the answer is no, the corrective steps above apply regardless of what the current-assumption column shows.

Find the year in which the cash surrender value hits zero under the guaranteed assumptions. That year is your deadline. Any fix needs to be in place well before that date, because once the cash value starts falling toward zero, the rising cost-of-insurance charges accelerate the decline in a feedback loop that becomes very hard to reverse. If you are within five years of that crossover and have not acted, time is the thing you are shortest on.

1
National Association of Insurance Commissioners. Life Insurance Illustrations Model Regulation – Section: 10. Annual Report; Notice to Policy Owners
2
National Association of Insurance Commissioners. Life Insurance Illustrations Model Regulation – Section: 7. Standards for Basic Illustrations
3
Office of the Law Revision Counsel. 26 USC 1035 – Certain Exchanges of Insurance Policies
4
FINRA. What You Should Know About Life Settlements
5
Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts