Which of the following statements concerning assumptions upon which insurance illustrations are based is correct?

• A. I only
• B. II only
• C. Both I and II
• D. Neither I nor II

Answer: (B)

In life insurance illustrations, the numbers shown are not guarantees. They are built on assumptions about future experience and are used to project how the policy might perform under those assumptions. The key point is that illustrations separate guaranteed elements from non-guaranteed, projected elements. The guaranteed portions reflect what is contractually guaranteed (like minimum death benefits or cash value floors), while the non-guaranteed portions reflect best-estimate assumptions about future dividends, interest credited, mortality, lapse rates, and expenses. Because these projections depend on future conditions, they can differ from actual results, which is why disclosures emphasize that illustrations are projections, not guarantees.

The correct statement is the one that recognizes illustrations are based on best-estimate, future assumptions rather than guaranteed values. Any claim that illustrations are based on guaranteed rates or guaranteed elements would be inconsistent with how illustrations are intended to be presented.