What is the significance of an illustration in Variable Life Insurance?

An illustration in Variable Life Insurance serves a crucial purpose by showing potential benefits, costs, and projections of the policy. It presents a hypothetical scenario of how the policy may perform over time, based on a set of assumptions about various factors such as investment performance, cost of insurance, and other variables.

This information is vital for policyholders because it helps them understand not only the growth potential of the cash value component of the policy but also the associated risks and costs involved. By outlining these financial projections, an illustration aids clients in making informed decisions regarding their life insurance options and allows them to compare different products effectively.

While interpretations of legal terms or tax implications may be discussed during the sales process, the illustration is particularly focused on providing clear insights into how the policy's features will impact the policyholder financially. It is important to note that an illustration does not constitute a binding contract, nor does it simplify legal terminology or provide specific tax advice. Instead, it stands as a valuable tool for visualizing and forecasting the expected outcomes of the insurance product, empowering clients with knowledge about their investment in variable life insurance.