FEDweek

Results Vary in Variable Life Policies

You shouldn’t assume that life insurance policy illustrations show future results exactly. With variable life insurance, there can be wild variations.

Suppose, for example, a 45-year-old male who wanted $1 million worth of variable life coverage back in 1999. By projecting 9 percent returns, the annual premium would have been around $5,500 for 20 years; with a 7 percent illustrated return, the annual premium would have been $9,000 for 20 years.

Four years into the policy, the policy projecting a lower return (and requiring a higher premium) would have had much greater cash value and would have called for lower ongoing premiums to keep the policy in force. Generally, projections in the 7 percent-8 percent range are reasonable for the long term but you should be prepared to persevere during periods when returns are weak.