Policy illustration is a detailed, carrier-generated document that projects the future performance of a life insurance policy based on specific assumptions about premiums, credited interest, policy charges, dividends, or index credits. It shows year-by-year values such as death benefit, cash value, surrender value, and sometimes projected loans, enabling clients and advisors to visualize how a product is expected to behave over time. In permanent policies such as whole life, universal life, indexed universal life, and variable universal life, illustrations play a central role in explaining the mechanics of flexible premiums, non-guaranteed elements, and long-term funding requirements. Regulatory rules require that illustrations distinguish between guaranteed and non-guaranteed values, highlight key assumptions, and avoid presenting speculative projections as promises. Used properly, policy illustrations help align client expectations with the realities of long-duration contracts that rely on interest rates, dividends, and market performance.

In day-to-day practice, advisors rely on policy illustrations to compare products and funding strategies, demonstrate the impact of different premium schedules, and test scenarios such as reduced payments, loans for supplemental retirement income, or changing death benefits. During sales conversations, illustrations are reviewed with clients to explain which values are guaranteed, which are based on current assumptions, and how those assumptions could change. Compliance departments and regulators expect advisors to avoid using illustrations as absolute guarantees, instead treating them as educational tools. When policies are in force, updated illustrations help evaluate whether funding remains on track, whether performance supports planned loans, or whether corrective action is needed to avoid lapse. Understanding policy illustrations allows advisors to communicate complex mechanics clearly, document recommendations, and manage long-term client relationships around realistic expectations for protection and cash value growth.