What Insurers Promise vs What They Show

By Frank Campbell on February 17, 2026

When people review a life insurance illustration, they often assume they’re looking at a promise. In reality, they’re reviewing two different things side by side: guaranteed values and non-guaranteed values (illustrated values).

Guaranteed values are “worst-case” estimates that show how a policy performs if an insurance company pays the bare minimum and every internal assumption falls to its lowest allowable level.

Non-guaranteed values, on the other hand, are “best-case” projections built on current dividend scales and long-term expectations. In fact, they’re estimates of how a policy might perform if an insurance company keeps interest rates high and their internal fees low forever.

Both projections are shaped by assumptions about mortality costs, company expenses, policy risk, and investment returns and are not locked in. Non-Guaranteed:

Uses optimistic assumptions (what a company expects or hopes will happen).
Assumes higher investment returns, lower administrative costs, and that people will live longer.

Guaranteed:

Uses worst-case assumptions (the most a company is allowed to charge).
Assumes the minimum possible investment return (often as low as2%) and the maximum possible mortality and expense charges permitted by the contract.

While illustrations show long-term growth curves, future cash values, and rates of return, they’re still just hypothetical models. For many policyholders, that gap creates confusion, especially when projections don’t match market changes.

But market changes are only one factor. Below, we take a closer look at how and why illustrations can mislead policyholders.

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TESTIMONIALS

Why Illustrations Can Mislead

Because projections rely heavily on current crediting assumptions, they often obscure the mechanics of a policy. To understand illustrations better, it helps to know the specific ways they can be misleading.

Hidden Internal Costs and Expense Loads

To cover the real cost of a policy, a company charges for a Cost of Insurance (COI) and other fees. (This includes administration, staffing, compliance, underwriting, and overhead.)

As you get older, the risk of passing away increases. Therefore, the COI increases yearly.

In the early years of an illustration, fees are small and growth looks great.
However, in later years (70, 80, and 90), rising costs can overwhelm your cash value.
Many illustrations fail to show these costs become high enough to “blow up” the policy.

“Disappearing” Premiums

Another common way illustrations mislead is by showing that premiums will eventually vanish or stop.

This usually assumes your policy’s cash value will grow fast enough to pay for itself.
If crediting rates drop below the forecast, your cash value won’t grow enough, sometimes amounting to thousands of dollars in catch-up premiums just to keep a policy from lapsing.

Unrealistic Interest Rate Assumptions

Illustrations often assume a steady interest rate (like 6% or 7%) every single year for decades.

If the market drops 10% one year and gains 10% the next, you aren’t back at zero — you’re actually behind.
Illustrations don’t show “bad years.” Instead, they show a smooth upward line that doesn’t account for the sequence of returns risk, where a few bad early years can permanently damage the policy’s value.

Similar Projected Values

Illustrations sometimes lead policyholders to believe all projected values carry the same level of certainty. While dividends themselves are non-guaranteed, once a dividend is credited, it becomes a permanent part of the policy’s cash value. That credited amount cannot be taken back.

Dividends

Non-guaranteed elements include dividends, credit rates, and in some policies, certain cost offsets. But companies are not required to declare dividends, and they can rise, fall, or flatten depending on company results and economic conditions.

If a company’s costs increase or their investments perform poorly, they can reduce your dividends at any time.

Spreading Results

Many projections spread results over decades, using long-term averages to hide short-term losses. That can obscure the impact of slow early growth, higher initial costs, or lower near-term performance and suggest stability that does not exist.

Back-Testing

For newer types of policies like Indexed Universal Life, companies often use back-testing. This means they examine a specific past 10-year period that had great market growth in order to make a projection.

Past performance, however, is not a guarantee of future results. By picking the best historical windows, companies create an expectation of growth the current market might not be able to match.