Which of the following is a charge deducted from the separate account of a variable product?

Which of the following is a charge deducted from the separate account of a variable product?

• A. Mortality expense (cost of insurance)
• B. Admin fees
• C. Sales load
• D. State premium taxes

Answer: (A)

In variable products, the money inside the contract is split into a separate account that holds the investment options. The charges that are taken directly from that separate account represent the insurer’s cost for providing the policy’s guarantees and insurance risk. The mortality expense is exactly this type of deduction—it covers the cost of life insurance protection and other guaranteed features, so it reduces the value in the separate account over time. Other charges listed are not taken from the separate account in the same way. Admin fees are typically charged to cover administrative costs but are not tied to the investment options in the separate account. Sales loads are paid from premiums up front or when funds are withdrawn, and state premium taxes are taxes paid by the insurer or the policy, not deductions from the separate account’s investment value.

In variable products, the money inside the contract is split into a separate account that holds the investment options. The charges that are taken directly from that separate account represent the insurer’s cost for providing the policy’s guarantees and insurance risk. The mortality expense is exactly this type of deduction—it covers the cost of life insurance protection and other guaranteed features, so it reduces the value in the separate account over time.

Other charges listed are not taken from the separate account in the same way. Admin fees are typically charged to cover administrative costs but are not tied to the investment options in the separate account. Sales loads are paid from premiums up front or when funds are withdrawn, and state premium taxes are taxes paid by the insurer or the policy, not deductions from the separate account’s investment value.