A guarantee provides a formal assurance that certain conditions will be fulfilled, for example that an insurer will pay €x minimum sum assured on death (the guaranteed sum being payable only except, for example, if payment could not be made due to insolvency).

”Guaranteed” is also clarified as unconditional in the context of guaranteed maturity value in the explanatory text to Guideline 3 of EIOPA’s Guidelines on this topic (EIOPA BoS 17/204 (11 October 2017)). EIOPA considers that the following statement in paragraph 1.55 of that document is also relevant in the context of the obligation in Article 16(a) of the Delegated Regulation: “…In particular, "guarantee" is a term that creates certain customer expectations, and, therefore, when this term is used, customers may assume there are no conditions attached to its use…”

EIOPA understands that “legitimate costs” are those costs which may be charged to a particular customer within the application and meaning of relevant European or national legislation or rules and are deemed acceptable or reasonable. This might include costs incurred in the distribution or administration of the contract, for example, an annual management charge or a part of legal or regulatory fees associated with a product such as arising from the drafting of the contractual terms and conditions.