Which term describes the charge the insurer uses to compensate for maintaining records, accounting, and reports generation under an insurance or annuity contract?

Which term describes the charge the insurer uses to compensate for maintaining records, accounting, and reports generation under an insurance or annuity contract?

• A. Mortality Charge
• B. Administration Charge
• C. Surrender Charge
• D. Investment Advisory Fee

Answer: (B)

Administration charges are the fees that cover the insurer’s ongoing administrative costs—keeping records, accounting, and generating reports for the contract. This expense is built into the policy or annuity and is typically assessed as a small percentage of the contract value on a regular basis, reducing the contract value over time. It’s distinct from mortality charges, which pay for the risk the insurer takes on the death benefit; surrender charges, which apply if you withdraw funds early; and investment advisory fees, which relate to fees charged by a manager or adviser rather than the insurer’s internal administrative tasks.

Administration charges are the fees that cover the insurer’s ongoing administrative costs—keeping records, accounting, and generating reports for the contract. This expense is built into the policy or annuity and is typically assessed as a small percentage of the contract value on a regular basis, reducing the contract value over time. It’s distinct from mortality charges, which pay for the risk the insurer takes on the death benefit; surrender charges, which apply if you withdraw funds early; and investment advisory fees, which relate to fees charged by a manager or adviser rather than the insurer’s internal administrative tasks.