What charges are included in a variable annuity?
Contract Maintenance Charge – each insurance company will assess a yearly maintenance charge to cover the administrative expenses associated with the variable annuity contract. This charge, usually assessed at each contract anniversary date and upon surrender of the contract, covers the cost of issuing the policy, as well as other administrative costs. Administrative Service Charge – is usually expressed as a percentage of the funds invested in the separate accounts. It covers the costs of transferring funds from one separate account option to another. Also covers the cost of policy statements and the tracking of deposits in the contract. Mortality and Expense Risk Charge – in most cases, the “M & E” charge pays for the guaranteed death benefit, ensures that the expense risks charged on the contract won’t increase, covers a guaranteed interest rate paid on one type of variable annuity subaccount and may cover the overhead expenses the insurer incurs with the annuity contract.This depen
