An indexed universal life illustration is a regulated sales document—not a forecast. AG 49-A limits certain illustrated index-crediting assumptions, while the Life Insurance Illustrations Model Regulation governs how guaranteed and non-guaranteed elements are presented.
What the illustration can and cannot tell you
An illustration shows how a policy would perform under selected assumptions. It can display premiums, death benefits, cash values, surrender values, charges, loans, and guaranteed values, but it cannot predict future index performance, carrier cap changes, participation rates, or policyholder behavior. Treat every non-guaranteed column as a scenario.
Find the guaranteed ledger first
The guaranteed column uses contractually guaranteed charges and rates. It often looks unattractive, but it answers the first solvency question: what happens under the contract’s worst permitted assumptions if planned premiums continue? Then compare it with the current-scale ledger and any alternate scenarios.
Separate index credits from market returns
IUL cash value is not invested directly in the S&P 500. Crediting follows the contract’s index method and may be limited by caps, participation rates, spreads, segment dates, and other terms. A 0% index-credit floor prevents a negative index credit for that segment; it does not prevent policy charges from reducing cash value.
Audit the design, not just the illustrated rate
Review premium against guideline and 7-pay limits, initial death benefit, option A or B, surrender period, cost-of-insurance schedule, rider charges, loan type and rate, and values at ages 65, 75, 85, and 100. Ask for lower-crediting and zero-crediting stress tests, not only the maximum permitted illustrated rate.
Ten questions worth asking
What is guaranteed? Which elements can the carrier change? What index method is used? Are dividends excluded? How do caps and participation rates work? What happens if premiums stop? What is the MEC limit? Which loan type is illustrated? At what loan balance does lapse risk rise? What assumptions are required to keep the policy in force?
Frequently asked questions
Does AG 49-A guarantee the illustrated return?
No. It constrains illustration practices; it does not guarantee future credits, caps, participation rates, or policy values.
Is a 0% floor the same as no loss?
No. It generally means no negative index credit for the segment. Policy charges and loan interest can still reduce cash value.
What is the most important illustration column?
Start with guaranteed values, then compare current assumptions with conservative stress tests and the premium required to keep the policy in force.
Primary sources
- NAIC Actuarial Guideline 49-A
- NAIC Life Insurance Illustrations Model Regulation #582
- NAIC consumer discussion of IUL illustrations
- FINRA insurance overview
Reviewed August 18, 2026. Educational information only. CentraLife does not provide tax preparation or legal services.