o you've decided what type of life insurance is right for you? Good. The hard part is over. Unfortunately, the agonizing has just begun. After you get your hands on your first life insurance policy "illustration," you'll have other issues to face.

A life insurance policy illustration is a set of projections prepared by the actuarial department of the insurance company. It shows how your policy will perform over your lifetime. It includes financial projections for each year. If it's a term policy, the projections extend to when the policy ends. Or if you chose permanent life insurance, the projections show data that stretches well beyond your 100th birthday.

For term insurance, a policy illustration usually shows at least three things: current and maximum premiums for each year, total premiums paid up to that year and each year's death benefits. If your policy has "re-entry" provisions for certain years - requiring you to qualify for the benefits through a physical exam, for example, there are columns telling you the premiums if you passed ("re-entered") or failed the company's medical requirements.

Sounds easy, doesn't it? If you are stopping at term insurance, you are in luck. If not, be prepared for a shocker when you take a look at your first permanent life insurance illustration.

Permanent insurance illustrations are complicated enough to make you want to give up the buying process altogether. Obviously, that's a bad idea because you'll end up with no insurance at all. The typical term insurance illustration runs two or three pages and contains 100 or so numbers. By comparison, the typical permanent life insurance illustration can run 10 pages with 1,000 numbers. Further complicating this numerical morass: Except for the numbers listed in the "guaranteed" columns, the actual pay out for virtually every number you see is bound to be higher or lower than projected.

Why are permanent life insurance illustrations so unreliable? Obviously, the company has to project years into the future, therefore making long-term estimates of its investment success, its expenses, and its mortality charges. These are the numbers that you often don't see. The numbers that you do see on the illustration, apart from the guaranteed premiums, cash value, and death benefits, are pie-in-the-sky figures. Many reputable agents tell their clients to forget the non-guaranteed numbers altogether and to consider them as icing on the cake (the cake being the guaranteed part). The problem is that many other agents don't, and they brandish the life insurance illustration as their primary sales weapon in the battle to get your business.

Life insurance agents often sell particular products by touting the company's "current interest rates" and "current dividend rates." It is tempting to just buy the policy with the highest current rate, just to get the buying process over with. The problem is that current rates are usually only guaranteed for three to 12 months, and some of the life insurance companies with the highest current rates have the most expensive policies in the long run. They have to show potentially high payoffs to attract buyers.

All of the non-guaranteed numbers are based on the company's best guess about future performance. That task is even harder than trying to estimate an investment's future performance. The insurance company estimates how well it will invest its portfolio, and also projects its expenses and mortality costs dozens of years into the future.

If you keep all of these factors in mind, there are ways to make illustrations work for you. First, agents are required to give you all the pages of the life insurance illustration, including the one with the Interest Adjusted Net Cost (IANC) indexes. These "box scores" for each policy take into account the premiums paid as well as the time value of money. They give you the cost per $1,000 for both guaranteed and projected death benefits (for term and permanent policies) and for the policy's cash value (for permanent policies). At least with the IANC indexes you can compare different policy illustrations in an apples-to-apples way. Insurance companies (and some states) require that agents give you all pages of the illustration (you can tell this by looking at the pagination - they always say "Page 1 of 6," for example). State laws also require that all illustrations include the IANC indexes for death benefits and for cash values where applicable.

When comparing illustrations, you should always ask for projections that show the payoff if current interest rates continue into the future. Then you should ask for a second illustration that shows the payment if the rates drop by two percentage points. It is surprising how much the numbers differ when the scenarios change. This is especially important when comparing policies from two different companies. Go for the policy that looks better at the lower rate. That is probably the more conservative company, and therefore has a better chance of meeting its projections.

Ask your agent for an Illustration Questionnaire (IQ) from the American College for all companies you are considering and then ask the agent to explain the information to you. If your agent doesn't know what the IQ is or can't explain what's on it, you should question that agent's credentials and buy from someone else. If an agent talks to you about variable life insurance, he or she must have a National Association of Securities Dealers license, because variable insurance is considered an investment product. Sometimes non-licensed agents discuss the product with prospective clients and then have another NASD licensed agent actually sign the application and submit it.

Finally, remember that clothes may make the man but illustrations don't make the company. Illustrations offer only a glimpse into how well a company thinks (or wants you to think) its policy will perform for decades to come. By knowing what illustrations to ask for, how to compare them and what your agent should do, you will maximize your chances of picking the right one.