August 28, 2026
4:25 am

What Is an Illustrated Rate?

An illustrated rate is the interest or crediting rate an insurance company assumes when it prints a projection of how your policy will perform in the future. It is an assumption, not a promise, and the whole reason a body of regulation exists around it is that assumptions printed on company letterhead were once used to sell policies that could not deliver what the page showed. When a universal life illustration shows the account value growing every year and the premium stopping at age 65, that picture depends entirely on the illustrated rate holding for decades. It rarely does.

Every illustration you have ever been handed has at least two columns: one built on guaranteed assumptions, showing the worst the company is contractually allowed to do, and one built on current or illustrated assumptions, showing what happens if today’s crediting rate and today’s charges continue unchanged forever. The gap between those two columns is the single most useful thing on the document, and almost nobody is shown it.

This page explains where the rules came from, what a compliant illustration must contain, how the indexed-product rules narrowed the game further, and how to read your own paperwork. Pine Lake Legacy offers education and a free policy review; nothing here is tax, legal or investment advice.

In This Article

The Abuse That Created the Rule
What Model Regulation 582 Requires
The Indexed Sequel: Actuarial Guidelines 49, 49-A and 49-B
Illustrated Rate vs. Four Terms It Is Confused With
How to Read Your Own In-Force Illustration in Ten Minutes
What the Gap Between Illustrated and Actual Means for Your Decision
Frequently Asked Questions

The Abuse That Created the Rule

In the early 1980s, short-term interest rates in the United States reached double digits. Universal life had just been introduced, and its selling proposition was that the policy’s account value would earn whatever the carrier’s portfolio earned. Agents illustrated 11, 12 and 13 percent crediting rates because those were, briefly, real.

Out of that came the vanishing premium sale: pay for seven or eight years, the illustration said, and the accumulated value will generate enough interest to pay all future premiums forever. Whole life versions of the same pitch used dividend scales projected from the same high-rate environment.

Rates then fell for thirty years. Policies sold on 12 percent assumptions credited 6 percent, then 4 percent. The premiums did not vanish. Policyholders who had stopped paying received lapse notices in their seventies, when replacing coverage was impossible or unaffordable. The resulting wave of litigation through the 1990s was one of the largest consumer disputes in the industry’s history, and it was not really about fraud in most cases. It was about a projection that had been presented as a plan.

The regulatory answer was not to ban projections. It was to force every projection to show its own downside on the same page.

What Model Regulation 582 Requires

The National Association of Insurance Commissioners adopted the Life Insurance Illustrations Model Regulation, Model #582, in 1995, and states adopted versions of it over the following few years. It is the reason modern illustrations look the way they do. Its key requirements are worth knowing by name, because you can check each one against the document in your hand.

A basic illustration must show guaranteed and non-guaranteed elements in separate, clearly labeled columns, with the guaranteed column based on the policy’s guaranteed maximum charges and guaranteed minimum crediting rate.
The self-support test. An insurer may not illustrate a scale it cannot support from the actual experience of the block of business.
The lapse-support test. An insurer may not illustrate results that depend on policyholders lapsing at a rate higher than the company actually expects. Before this rule, a company could quietly assume that enough people would walk away to subsidize those who stayed.
An annual certification by an illustration actuary that the illustrated scale meets those tests, filed with the state insurance department.
A signed illustration at delivery and a plain-language statement that the non-guaranteed figures are not guaranteed.

Model #582 is a model, which means the version that governs your policy is your own state’s adoption of it. Your state department of insurance can tell you what it adopted and when; ask for the current citation rather than relying on a summary.

The Indexed Sequel: Actuarial Guidelines 49, 49-A and 49-B

Indexed universal life created the same problem in new clothing. Rather than illustrating a portfolio rate, carriers illustrated a rate derived from a historical lookback of an equity index, and there was no uniform method, so different companies illustrated wildly different rates for economically similar products.

Actuarial Guideline XLIX, effective September 1, 2015, imposed a common method: a maximum illustrated rate calculated from a 25-year lookback of the benchmark index account under the product’s current caps, with a further constraint tied to the carrier’s own general account earned rate. Carriers responded by adding multipliers and bonuses that arithmetically escaped the cap. AG 49-A, adopted in December 2020, closed most of that. AG 49-B, effective for new business from May 1, 2023, closed the remainder by requiring that supplemental index accounts and bonused accounts not illustrate better than the benchmark.

Three lessons for a policy owner. First, an illustration produced before September 2015 was prepared under no uniform cap and is not comparable to one produced today. Second, the illustrated rate on your indexed policy is a regulatory ceiling calculation, not a forecast of your account. Third, none of these guidelines changed a single policy’s actual crediting; they changed only what may be printed. Ask the carrier which guideline governed the illustration you were sold and which governs the one you request now.

Term	What it is	Guaranteed?	Who sets it	Where to find it
Illustrated rate	Assumed future crediting used in a projection	No	Carrier, within AG 49-B limits for indexed products	Illustration cover sheet
Credited rate	What was actually applied last period	Already happened	Carrier, declared periodically	Annual statement
Guaranteed minimum rate	Contractual floor	Yes	Policy contract at issue	Policy specifications page
Cap rate	Ceiling on index credit for a period	Usually only a guaranteed minimum cap	Carrier, declared periodically	Annual statement or carrier rate sheet
Participation rate	Share of index movement credited	Usually only a guaranteed minimum	Carrier, declared periodically	Annual statement or carrier rate sheet

The Indexed Sequel: Actuarial Guidelines 49, 49-A and 49-B

Illustrated Rate vs. Four Terms It Is Confused With

Credited rate. The rate actually applied to your account value for a past period. It is history, it is on your annual statement, and it is the only number on this list that already happened.

Guaranteed minimum rate. The floor written into the contract, commonly in the 1 to 3 percent range on universal life issued over the last few decades and often 0 percent on indexed products. It is a promise. The illustrated rate is not.

Cap rate and participation rate. On an indexed policy, these are the levers that convert index movement into credited interest, and the carrier can usually change them within contractual limits. The illustrated rate is downstream of them. See how a cap rate works and what a participation rate does for the mechanics.

Internal rate of return. A measure of what the policy returns to a beneficiary or an owner across a set of cash flows. Buyers in the secondary market think in these terms. It is not what the illustration column is showing you.

The distinction that matters most in practice is between the illustrated rate and the guaranteed column. If a policy lapses in the guaranteed column at age 78 but carries to 100 in the illustrated column, you are holding a projection, not a plan, and the difference is roughly two decades of coverage.

How to Read Your Own In-Force Illustration in Ten Minutes

Ask the carrier’s policyholder service line, in writing, for an in-force illustration with three specific solves. Most carriers provide these at no charge, often within two to three weeks. Ask for:

Current assumptions, current planned premium. When does the policy lapse if you keep doing exactly what you are doing?
Guaranteed assumptions, current planned premium. When does it lapse in the worst contractual case? This is the column that answers “what if rates or charges move against me.”
Solve for the premium that carries the policy to age 100 on current assumptions, and again on guaranteed. Two numbers. The distance between them is the size of your exposure.

Then look at three fields on the cover sheet: the illustrated crediting rate, the current credited rate on your last annual statement, and the guaranteed minimum. If the illustrated rate is meaningfully above what you have actually been credited over the last several years, the projection is optimistic by exactly that margin, compounded. Our page on what an in-force illustration is covers the request process in more detail.

One caution: the numbers are only as good as the assumption that you keep paying the illustrated premium on schedule. A missed year does not simply postpone the plan; it permanently reduces the account value that was doing the compounding.

What the Gap Between Illustrated and Actual Means for Your Decision

When the in-force illustration shows a policy lapsing before life expectancy unless a much larger premium is paid, there are four honest paths, and the illustrated rate is what reveals which one you are on.

Pay more. Correct when the coverage is still needed, the required premium is affordable, and the insured’s health makes replacement impossible or expensive.

Reduce the face amount. Lowering the death benefit lowers the monthly cost of insurance and can make the existing premium sufficient. This is the most underused option in the entire market. Ask the carrier for a reduced face solve.

Surrender. You receive the cash surrender value, less any surrender charge still applicable, and gain over basis is ordinary income. Simple, immediate, and often the smallest number available.

Have it valued in the secondary market. A policy whose illustrated rate never materialized can still be worth more than its cash value to an institutional buyer, particularly when the insured is generally over 65, the face amount is above roughly $100,000, and health has declined since issue. Federal Government Accountability Office work published in 2010 (GAO-10-775) found sellers typically received roughly 10 to 35 percent of face value. Whether that beats surrender in your case is exactly what a valuation answers.

Pine Lake Legacy does not purchase policies. A free policy review is education: send the cover page and the in-force illustration and you get a written read on what you hold. Call (732) 978-9575. And if the honest answer is that your policy is performing fine and the illustrated rate was conservative, that is a legitimate result too.

Frequently Asked Questions

Is the illustrated rate a promise from the insurance company?

No. It is a non-guaranteed assumption, and every compliant illustration says so in writing while showing a parallel guaranteed column built on the contract’s minimum crediting rate and maximum charges. The guaranteed column is the promise. If those two columns end in very different places, you are holding a projection rather than a plan.

Why did my policy underperform the illustration I was given?

Usually because the illustrated crediting rate assumed conditions that did not persist, and in some cases because cost of insurance charges rose within contractual limits. Neither is necessarily improper. Request a current in-force illustration on both current and guaranteed assumptions to see where the policy stands now rather than where it was projected to stand.

What did NAIC Model Regulation 582 change?

Adopted in 1995 and enacted by states over the following few years, it requires a basic illustration showing guaranteed and non-guaranteed elements separately, prohibits illustrating a scale the insurer cannot support from actual experience, bans lapse-supported pricing, and requires an annual certification by an illustration actuary filed with the state insurance department.

What is Actuarial Guideline 49 and does it apply to my policy?

AG 49, effective September 2015 and revised as AG 49-A in 2020 and AG 49-B in 2023, caps how high an indexed universal life illustration may assume the index account will credit. It governs what carriers may print, not what your policy actually credits, and older illustrations were prepared under no such cap. Ask your carrier which version applied.

Can I get an updated illustration for free?

In almost all cases yes. Call the carrier’s policyholder service line or send a written request asking for an in-force illustration on current assumptions and on guaranteed assumptions, plus a solve for the premium required to carry the policy to age 100. Expect two to three weeks. Get the request and the response in writing.

Does a poor illustrated rate mean I should sell the policy?

Not on its own. It means the funding plan needs revisiting. Paying more, reducing the face amount, surrendering, and a secondary market sale are all legitimate answers, and which one fits depends on whether the death benefit is still needed and what the policy would fetch. A free review will price the options at no cost.

Find out what your policy is worth — free, confidential, no obligation.

A 15-minute educational review covers your eligibility, every alternative, and a realistic view of what each path would net you.

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