Benefit Illustration

A benefit illustration has to be given for each life insurance policy that is recommended to a consumer. More than 100,000 life insurance policies are sold each year. The number of benefit illustrations given out must be at least two times of the number of policies sold. This makes the benefit illustration to be widely used.

Many people criticised the benefit illustration to be too complicated. As a result, consumers do not bother to read or understand them. It is the duty of the insurance adviser to explain the content of the benefit illustration, but most advisers do not do this duty. This is evidenced by the large number of insurance buyers who do not understand the key features of the policy and the key points in the benefit illustration.

There are only two important points that the insurance buyer should be aware:

a) distribution cost
b) effect of deduction

These two key figures determine whether the insurance buyer is paying too much for the insurance or getting too little back as investment return.

If consumers know what to look for, and how to interpret these figures, they can avoid paying thousands of dollars away unncessarily. These key points are explained in my book, Practical Guide on Financial Planning, which can be bought online here for only $12. The book also contained advice on how to identify and avoid bad financial products.