Fees and Charges for Life Insurance

Before buying a life insurance policy, be sure you understand the policy charges and fees.

Insurance companies deduct some industry standard fees from your premium and cash value. Keep in mind that these charges vary by product.

Common life insurance fees

• Premium loads/sales charges – These compensate the insurance company for sales expenses, state and local taxes. These charges are deducted from your premium payment before it is applied to the policy.
• Administration fees – These are used to pay the costs of maintaining the policy, including accounting and record keeping. Administration fees usually are deducted from your policy value once a month.
• Mortality and expense risk charges – When a policy is issued, the insurance company assumes the insured person will live to a certain age based on their current age, gender and health conditions. This charge compensates the insurance company in the case the insured person doesn’t live to the assumed age. It is generally charged once a month.
• Cost of insurance – This is the cost of actually having insurance protection. It is based on the insured person’s age, gender, health and death benefit amount. Cost of insurance is also usually charged once a month
• Surrender charges – This charge is deducted from your cash value if you surrender (terminate) your policy during your surrender charge period. Be sure to check the length of your surrender charge period when evaluating a policy to buy.
• Monthly per thousand charge – This charge is based on the insured person’s age, gender, and underwriting classification, and is assessed monthly.
• Fund management fees – These charges compensate the fund managers for their work. Fund management fees are usually deducted from the price paid for the shares of underlying fund options, and not directly from your cash value.

Next steps

If you have questions about these changes, ask your insurance or investment professional or read brochures for the specific products you are considering. Keep in mind that as your personal situations change (i.e. marriage, birth of a child or job promotion), so will your life insurance needs. Take care to ensure that the insurance product you select is suitable for your long-term needs.