How to review a life insurance illustration

When you are considering starting a life insurance plan, a usual part of the process is that the life insurance adviser or website that you are using will provide you with an “illustration” from the life insurance company. This will set out the cover details (like the amount of cover being applied for and any optional features included in the income insurance or life insurance plan) and will also contain your personal details (like name, date of birth, and so on). Here are several points to check to make sure you fully understand your illustration.

First, it’s important to double check that your personal details are accurate. For example it’s vital to check that your date of birth and smoking status are correct (particularly as these can dramatically affect the cost of life insurance).

The next point to check is the amount of life insurance cover that is being applied for. This shows the amount that the life insurance company will be setting up – so obviously this is important to double check too.

Another consideration is any optional extras that are included in your plan. For example if you decided to add a “future insurability” feature to your plan, it should be outlined on the quote (“future insurability” is an option where, for an additional fee, you can choose to increase your life insurance sum in the future without having to provide further health information). Or if you had opted to add an option like trauma insurance to your life insurance or health insurance plan, this would be shown too. Also the cost of any extras that have been added to your plan should be shown – so you can easily review the cost of these.

It’s also a good idea to check whether your life insurance amount is set to increase with inflation (sometimes called a “CPI option”). This is usually an option you can select – and it’s important to know whether or not your policy includes this._Some other policies should be taken care of like income insurance,adding extra cover and others while reviewing illustration.
Some of the other points to check when reviewing a life insurance illustration areas are as:

On your illustration, the type of premium that you have will be shown (it will probably be described as a “stepped” or “rate for age” or “level” premium). It’s important to know which you have – and to understand what this means. Why? The reason is that the type of premium you have will make a huge difference to the long term cost of your life insurance. In short, if you want your life insurance for the long term (for example 10 years or more) which is on scale other of income insurance you would probably want to consider a level premium – while if you are looking for shorter term cover then a stepped premium is probably the best option. Because of the difference this can make to the amount you pay long term for the life insurance, the type of premium you have is vital to understand clearly.

A second point to check is whether the life insurance premium you have is guaranteed. Some premiums are – while others are not, which means that the insurer can alter them in the future if they wish to. Particularly if you choose to have a level premium it’s very important that the insurer guarantees the premium and cannot alter it – otherwise you miss out on the long term cost certainty that a level life insurance premium is supposed to provide._