August 28, 2026
4:18 am

What Is a Non-Guaranteed Policy Element?

A non-guaranteed policy element is any value in a life insurance contract that the insurance company is permitted to change after the policy is issued — current cost of insurance rates, current interest crediting rates, current expense charges, dividend scales, and the caps and participation rates on indexed products. The contract also states a guaranteed limit for each of them: a maximum charge, a minimum credit. Everything between the current figure and that guaranteed limit is risk the policy owner carries, not the insurer.

The most useful way to understand this category is to understand why it exists at all, because the rules around it were not designed in a boardroom. They were written in response to three separate market failures, each of which cost policyholders real money before it produced a regulation. Learning the history is what makes the rule stick.

This page walks through those three episodes and then converts them into a short list of questions to ask your carrier. Everything is stated as of 2026, and illustration regulations continue to evolve, so confirm the current requirements with your state department of insurance. Pine Lake Legacy provides education and a free policy review only, and does not give tax, legal or investment advice.

In This Article

The Structure: Two Columns, Not One
Episode One: The Vanishing Premium, and What It Produced
Episode Two: In-Force Cost of Insurance Increases
Episode Three: Indexed Universal Life and the Illustrated Rate
The Four Questions That Turn This Into Action
What the Answers Mean for Keeping, Reducing or Selling
Frequently Asked Questions

What Is a Non-Guaranteed Policy Element?

The Structure: Two Columns, Not One

Open any life insurance illustration and you will find the same architecture. One set of columns projects the policy on current assumptions — today’s crediting rate, today’s cost of insurance scale, today’s dividend. Another set projects it on the guaranteed basis: the worst the company is contractually allowed to do, meaning maximum charges and minimum credits, every year, forever.

The guaranteed column is the promise. The current column is a projection of what happens if nothing changes, and something almost always changes across thirty or forty years.

The elements that sit in the changeable category on common products are: on whole life, the dividend scale; on universal life, the current cost of insurance rate scale, the current credited interest rate and current expense charges; on indexed universal life, all of those plus the cap rate, the participation rate and any spread; on variable products, the separate account charges up to their guaranteed maximums. What is guaranteed is typically the death benefit as long as the contract is kept in force under its terms, the guaranteed minimum interest rate, the maximum cost of insurance table, and any secondary guarantee you specifically bought.

See guaranteed policy elements for the other half of the picture.

Episode One: The Vanishing Premium, and What It Produced

In the early 1980s, interest rates in the United States were extraordinarily high, and life insurers illustrated interest-sensitive policies at crediting rates in the low double digits. The sales concept that followed was irresistible: pay premiums for a limited number of years, and after that the policy’s own accumulated value would generate enough to cover the cost of insurance forever. The premium would vanish.

It did not vanish. Rates fell through the late 1980s and 1990s, crediting rates fell with them, and policyholders who had stopped paying discovered their policies eroding toward lapse in their sixties and seventies. Extensive litigation followed through the 1990s.

The regulatory response was the National Association of Insurance Commissioners’ Life Insurance Illustrations Model Regulation, adopted in 1995 and enacted across most states in the years after. It did several concrete things that survive today: it requires an illustration to show the guaranteed basis alongside the current basis; it prohibits illustrating a policy on a lapse-supported basis; it requires an illustration actuary to certify that the illustrated scale is supportable by actual experience; and it requires the carrier to provide an annual report and, on request, an in-force illustration.

The lesson families still need: an illustration was never a promise, and the industry’s own regulator said so in writing thirty years ago. See what to do when a vanishing premium did not vanish.

Episode Two: In-Force Cost of Insurance Increases

The second episode is more recent and it caught people who had done everything right. Beginning around 2015 and continuing for several years, multiple life insurers raised current cost of insurance rates on blocks of in-force universal life policies, many of them held by owners in their seventies and eighties.

The carriers’ position was that the contracts permitted current rates to be set anywhere up to the guaranteed maximum, and that changed expectations about mortality, interest and persistency justified moving them. Policyholders responded that the increases were disproportionately aimed at older insureds and larger policies. Litigation and state regulatory attention followed, some of it resolved by settlement, and the episode reshaped how advisers think about universal life.

The durable lesson has nothing to do with any particular company. It is that on most universal life contracts, the current cost of insurance rate is a non-guaranteed element, the guaranteed maximum table in your policy is usually far above what you are being charged today, and the difference is a risk you own. A policy that looked fine at a 4 percent illustrated crediting rate can require several times the planned premium if charges rise and credits fall together. See how cost of insurance is calculated.

Element	Guaranteed or Not	Who Can Change It	What Limits the Change
Death benefit while in force	Guaranteed under the contract terms	No one	The contract
Current cost of insurance rate	Non-guaranteed	The carrier	The guaranteed maximum table in the policy
Credited interest rate	Non-guaranteed	The carrier	The guaranteed minimum rate
Policy dividend	Non-guaranteed	The board, annually	Nothing; dividends can be zero
Index cap and participation rate	Non-guaranteed	The carrier at renewal	Contractual guaranteed minimums

Episode Two: In-Force Cost of Insurance Increases

Episode Three: Indexed Universal Life and the Illustrated Rate

The third episode is about arithmetic in sales material. Indexed universal life credits interest based on the movement of a market index, subject to a cap, a participation rate and sometimes a spread, with a floor that protects against negative index years. By the early 2010s, competing carriers were illustrating these products at long-run rates that made the projections look dramatically better than they had any business looking, largely by making optimistic assumptions about how the index-crediting mechanics would perform over decades.

The NAIC responded with Actuarial Guideline 49 in 2015, and then with AG 49-A in 2020, which constrained the maximum illustrated rate and limited how bonuses and multipliers could be shown. Neither guideline changed the policies themselves. They changed what a salesperson may print.

That distinction is the point. Every indexed element — the cap rate, the participation rate, the spread — remains non-guaranteed and can be reset by the carrier at renewal, subject only to a contractual guaranteed minimum. When a cap falls from 12 percent to 8 percent, the guaranteed minimum, not the original illustration, is what you are entitled to. Read what an illustrated rate does and does not mean.

The Four Questions That Turn This Into Action

History is only useful if it produces a phone call. Ask the carrier’s policyholder service line for these four things in writing, and note that every one of them is something you are entitled to request.

One: an in-force illustration on current assumptions, at the premium you are actually paying, showing the year the policy is projected to lapse. Two: the same illustration on the guaranteed basis. The gap between those two lapse years is the exact size of the non-guaranteed risk you are carrying, expressed in years of coverage. Nothing else in the file tells you that. Three: the premium required to carry the policy to age 95 or 100 on each basis, so you know what solving the problem would cost. Four: the history of changes — ask whether current cost of insurance rates, crediting rates, caps or dividend scales have been changed on this contract in the last ten years, and when.

Then read the numbers with one question in mind: if the guaranteed-basis lapse year falls inside a realistic life expectancy, this policy has a problem that time will not fix. See why the in-force illustration matters.

Two terms to keep separate while you do this. A no-lapse guarantee is a secondary guarantee that keeps the death benefit in force regardless of account value — but only if you meet its premium requirements exactly and on time, and missing a payment can permanently forfeit it. And an in-force illustration is a projection from today’s actual values, not a restatement of the original sales illustration.

What the Answers Mean for Keeping, Reducing or Selling

Run the four questions, then look at where you land.

If the guaranteed-basis projection holds past a realistic age and the premium is affordable, keep the policy and stop worrying about this category. Some contracts are genuinely robust.

If the current basis works but the guaranteed basis does not, you are carrying real risk. The reasonable responses are paying more now to build a cushion, reducing the face amount so the required premium falls, converting to a product with stronger guarantees where that is available, or moving to reduced paid-up coverage on a whole life contract.

If neither basis holds and the premium is not affordable, the policy is on a clock, and the clock matters because value declines as the projected lapse date approaches. This is the case where a secondary-market review is genuinely worth doing rather than an upsell: a buyer purchases the policy with its charges and its risks, and a policy heading for lapse is worth more sold than surrendered and far more than lapsed. Compare it honestly against a policy loan, surrender value, and reduced coverage before deciding.

And sometimes the honest answer is none of the above. Small face amounts do not attract offers. A healthy insured with a long projected life expectancy will not either. If a family still needs the death benefit, keeping it and funding it is the right answer even when it is inconvenient.

Pine Lake Legacy does not purchase policies and is not licensed in every state. A free review will read your in-force illustration with you and say which of those four situations you are in. Send the policy cover page and the most recent annual statement, or call (732) 978-9575.

Frequently Asked Questions

Which parts of my policy can the insurance company change?

Typically the current cost of insurance rate, the current credited interest rate, current expense charges, the dividend scale on participating policies, and the cap, participation rate and spread on indexed products. Each has a contractual limit stated in the policy, and the space between today’s figure and that limit is risk you carry.

Why does my illustration show two sets of numbers?

Because the NAIC Life Insurance Illustrations Model Regulation, adopted in 1995 and enacted in most states afterward, requires a guaranteed-basis projection alongside the current-basis one. The guaranteed column shows the worst the carrier may contractually do. It is the promise; the current column is only a projection of unchanged conditions.

Can my insurer really raise my cost of insurance rates?

On most universal life contracts, yes, up to the guaranteed maximum table printed in the policy, and several carriers did raise current rates on in-force blocks starting around 2015. Ask your carrier in writing whether current rates on your contract have changed in the last ten years and on what dates.

What is the single most useful thing to request from my carrier?

Two in-force illustrations at the premium you actually pay: one on current assumptions and one on the guaranteed basis. The difference between the two projected lapse years is the exact size of the non-guaranteed risk you are carrying, expressed in years of coverage. Nothing else in the file tells you that.

Does a no-lapse guarantee protect me from all of this?

Partly, and only if you meet its conditions precisely. A secondary guarantee keeps the death benefit in force regardless of account value, but usually requires premiums paid in the right amounts on time, and missing or underpaying can forfeit the guarantee permanently. Ask the carrier whether yours is currently satisfied and through what date.

Should I sell a policy whose charges keep rising?

Only after comparing it against the alternatives. If the guaranteed-basis projection lapses inside a realistic life expectancy and the premium is unaffordable, the policy is on a clock and its value declines as that date approaches. Compare a smaller face amount, reduced paid-up coverage, surrender value and a secondary-market review before deciding.

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