Which charge is deducted from the separate account and is specifically described as a risk fee?

Which charge is deducted from the separate account and is specifically described as a risk fee?

• A. Mortality expense
• B. Expense risk fee
• C. Investment mgmt fee
• D. State prem taxes

Answer: (B)

In a variable annuity, the separate account is charged fees to cover the insurer’s risks and costs tied to guarantees and mortality. The charge that is described as a risk fee is the expense risk fee. This fee specifically compensates the insurer for the mortality and expense risk it assumes under the contract, and it is taken out of the separate account along with other ongoing costs. It’s distinct from the investment management fee, which goes to the fund manager for running the subaccounts, and from state premium taxes, which are taxes. Mortality expense is part of the broader mortality and expense charge, but the term that labels a fee as a risk-related deduction is the expense risk fee, making it the best answer.

In a variable annuity, the separate account is charged fees to cover the insurer’s risks and costs tied to guarantees and mortality. The charge that is described as a risk fee is the expense risk fee. This fee specifically compensates the insurer for the mortality and expense risk it assumes under the contract, and it is taken out of the separate account along with other ongoing costs. It’s distinct from the investment management fee, which goes to the fund manager for running the subaccounts, and from state premium taxes, which are taxes. Mortality expense is part of the broader mortality and expense charge, but the term that labels a fee as a risk-related deduction is the expense risk fee, making it the best answer.