What is the primary purpose of a policy illustration?

A policy illustration primarily serves to provide a detailed and visual representation of the projected benefits, premiums, and cash values of a life insurance policy. This tool is crucial for potential policyholders as it offers a clear overview of what they can expect from their investment over time. By presenting projected values, policy illustrations help consumers assess the long-term viability and benefits of a policy, enabling them to make informed decisions about their life insurance coverage.

Additionally, it's important to recognize that these illustrations are generally based on certain assumptions, such as interest rates and mortality rates, which can vary. Therefore, they present a picture of likely outcomes rather than guaranteed results. This function distinguishes policy illustrations from other aspects of insurance documentation, as it focuses specifically on the financial elements that are integral to the policyholder’s understanding of their insurance product.