Updated October 2026 · By Matt Selph, Straight Answer Wealth Group
To read an IUL illustration, compare two columns, not one. The “non-guaranteed” column is a projection the insurer can change at will; the “guaranteed” column is the legally binding worst case. Judge the policy on the guaranteed numbers and the assumed crediting rate — the shiny projection is a sales tool, not a promise.
Here’s the part nobody tells you at the kitchen table: the glossy number on page one of an indexed universal life illustration is the one number the insurance company is legally allowed to be wrong about. On purpose.
That’s not me being cynical. It’s so true that regulators had to step in — twice — to stop those projections from getting out of hand. Let’s decode the document the way an advisor who isn’t trying to sell you one would.
What is an IUL illustration, really?
An IUL illustration is a multi-page spreadsheet that projects your premiums, cash value, and death benefit out to age 90, 100, or 121. It looks like a forecast. It is not.
The Journal of Accountancy put it bluntly: after the first policy year, the only true guarantee is that your actual results will differ from what the page shows. The footnotes on the exhibit even admit the numbers are “certain to change.”
So the illustration isn’t a lie — it’s a possibility dressed up in a suit. Your job is to figure out which numbers are promises and which are hopes.
Guaranteed vs. non-guaranteed columns: which one should you trust?
Every compliant illustration shows at least two scenarios side by side. Most buyers stare at the pretty one and ignore the honest one. Flip that habit.
- Guaranteed column. The worst-case math: the insurer’s minimum interest rate (often 0% or 1%) and the maximum mortality and expense charges the contract allows. This is the floor — the deal they can’t legally break.
- Non-guaranteed (current) column. Today’s crediting rate and today’s charges, projected forward as if nothing ever changes for 40 years. The insurer can revise these anytime within contract limits.
- Intermediate column. Some carriers show a midpoint. Don’t fall for it — the midpoint is not “most likely.” It’s just a number sitting between best hope and worst case.
Here’s the gut-check. In one classic Journal of Accountancy sample, the guaranteed column had the policy collapsing to zero by year 12, while the non-guaranteed column showed it thriving at age 99. Same policy. Same page. That gap is the whole ballgame.
A quick side-by-side
| What you see | Non-guaranteed column | Guaranteed column |
|---|---|---|
| Crediting rate assumed | Today’s cap/par rate, held flat for decades | Contract minimum (often 0–1%) |
| Cost of insurance | Current charges | Maximum charges allowed |
| Can the insurer change it? | Yes, almost anytime | No — it’s contractual |
| How to treat it | Best-case hope | The real downside test |
Why did regulators cap the assumed rate? (AG 49 and AG 49-A)
Because the projections got silly. A decade ago, some IUL illustrations assumed 8%+ crediting rates forever, making the policies look like magic money machines.
So the National Association of Insurance Commissioners dropped Actuarial Guideline 49 in 2015 to rein in the illustrated rate. When carriers found loopholes with bonuses and multipliers, regulators came back with AG 49-A, effective January 1, 2021.
Two numbers worth knowing. Under AG 49-A, the benchmark index rate can’t exceed 145% of the insurer’s net investment earned rate, and the illustrated “arbitrage” on policy loans was cut from 100 basis points down to 50. Translation: the government literally had to put a speed limit on the optimism. If the assumed rate on your illustration still looks heroic, that’s your first red flag.
What are the IUL illustration red flags to look for?
You don’t need an actuary’s license. You need to know where the bodies are buried. Scan for these:
- A high assumed crediting rate. Anything near the AG 49-A ceiling, held flat for 40 years, is a fantasy. Markets don’t return the cap rate every single year — the 0% floor years drag the real average down.
- The cost of insurance ramp. Cost of insurance (COI) rises as you age. Late in the illustration, those charges can quietly eat the cash value if crediting underperforms.
- “Vanishing” premiums. If the projection says you stop paying in year 10, read the fine print. When rates dip or charges climb, the premium can reappear — and budget-busting isn’t a great retirement surprise.
- Cap and participation rates that aren’t guaranteed. The cap (your max credited return) and par rate can be lowered by the insurer. A 10% cap today can become a 6% cap later.
- A missing guaranteed column or summary pages. If the narrative, definitions, and signature pages aren’t there, the illustration is incomplete — ask for the whole thing.
None of this means IUL is “bad.” It means an IUL is a specialized tool — one piece of a tax-free income plan, not the whole plan — and the illustration is where it most often gets oversold.
How do I stress-test the illustration myself?
Three moves take about ten minutes and save a lot of regret.
1. Read the guaranteed column first. If the policy falls apart on the guaranteed numbers before your life expectancy, you’re leaning entirely on the insurer’s goodwill. Decide if you’re comfortable with that.
2. Ask for a lower assumed rate. Have the agent re-run it at a rate 1–2% below what’s shown. If the whole thing crumbles, the plan was built on the best case, not a realistic one.
3. Check the carrier’s strength. Non-guaranteed promises are only as good as the company behind them. Look up the insurer’s financial strength ratings before you trust a 40-year projection.
For context on how this fits the bigger picture, our guide to tax-efficient retirement income planning shows where a properly funded IUL can sit alongside Roth dollars and other buckets — and where it shouldn’t.
Is a higher illustrated value always better?
Nope — and this is the contrarian truth most buyers miss. A juicier illustration often just means a more aggressive set of assumptions, not a better policy.
Two agents can illustrate the same policy and make one look far richer simply by nudging the assumed rate or the funding pattern. The number on the page measures the optimism of the assumptions as much as the quality of the contract.
That’s why comparing two illustrations side by side is nearly useless unless they use identical assumptions. Ask both agents to run the exact same assumed rate, premium, and death benefit. Suddenly the real differences — caps, floors, charges, loan provisions — show up. Lowering your taxes in retirement is a strategy question first; the product comes second, which is the whole point of our rundown on the best ways to reduce retirement taxes.
Frequently asked questions
Are the numbers in an IUL illustration guaranteed?
Only the guaranteed column is contractual. The non-guaranteed column reflects current rates and charges the insurer can change, and it’s firm only for the first policy year. After that, treat it as a projection, not a promise.
What is a good assumed crediting rate on an IUL illustration?
There’s no magic figure, but conservative is safer. Since AG 49-A (effective 2021) caps the illustrated benchmark at 145% of the insurer’s earned rate, many realistic illustrations land in the mid-single digits. If yours assumes a flat high rate for decades, ask to see it re-run lower.
Why does the cash value drop in later years on some illustrations?
Because the cost of insurance rises with age. If crediting doesn’t keep pace, those growing charges pull from the cash value. The guaranteed column shows how bad that can get in the worst case.
Can I compare two IUL illustrations directly?
Only if they use identical assumptions — same assumed rate, premium, death benefit, and funding. Otherwise you’re comparing two guesses, not two policies. Standardize the inputs first.
Is an IUL a good source of tax-free retirement income?
It can be one piece of a tax-efficient plan, because properly structured policy loans can be accessed without triggering income tax. But it has real tradeoffs — charges, caps, and the need to keep the policy in force. It’s a tool inside a plan, not a one-size-fits-all answer.
The bottom line
An IUL illustration isn’t out to trick you — but it’s built to show you the sunny day, not the rainy one. The guaranteed column and the assumed rate tell you more about the deal than the big number ever will.
If you’ve been handed an illustration and you’re not sure which numbers are real, that’s exactly the moment to get a second set of eyes before you sign anything. A quick, no-pressure review as part of our Tax-Free Wealth Secrets process can tell you whether the policy fits your plan — or whether the plan needs a different tool. No sales pitch, just a straight answer.
About the author. Matt Selph is the founder of Straight Answer Wealth Group and helps pre-retirees (ages 45–65) build tax-efficient, market-protected retirement income. Connect with Matt on LinkedIn.
This article is for educational purposes only and is not financial, tax, insurance, or legal advice. Insurance product features, guarantees, and illustrations vary by carrier and are subject to the terms of the policy contract. Guarantees are backed by the claims-paying ability of the issuing insurer. Consult a licensed professional about your specific situation before acting. Sources: Society of Actuaries — The Impact of AG 49 and AG 49-A on IUL Illustrations; Journal of Accountancy — Understanding Life Insurance Illustrations.
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