Which statement best describes nonguaranteed values in a life insurance illustration?

• A. They are projections that may not occur
• B. They are guaranteed future values
• C. They always increase cash value
• D. They are not subject to any disclosures

Answer: (A)

In life insurance illustrations, nonguaranteed values are projections based on assumptions about future performance, such as credited interest or dividends, and future policy expenses. Because these figures depend on variables that aren’t guaranteed, they’re not promises of what will actually happen. That’s why they’re described as projections that may not occur.

This is why the statement that nonguaranteed values are projections that may not occur is the best description. They reflect expected, not guaranteed, performance and can rise or fall depending on how the insurer performs and on policy factors.

It also helps to note that nonguaranteed values are not guaranteed future values, so they aren’t guaranteed; they’re not assured and can change. They do not always increase, since actual credited amounts can be higher or lower than projected. And these illustrations include disclosures about how the nonguaranteed values are derived and the uncertainties involved, not something that would be excluded from disclosure.