A Close Look at the Cost Factors on Your Life Insurance Policy
Written by Dongmiao Cui
Besides premiums paid to the insurance company, there are other fees and charges that you need to be well aware of as they may affect the value of the policy. Depending on the company and the policy, these fees and charges could be either deducted from your premium payment or from the cash value of your policy.
There are three ways insurance agents may charge you for their services. The first one is commission, a fee that you pay to an insurance salesperson for his or her service. Instead of commission, you may also be charged for a single fixed fee by insurance salespeople or brokers. In other cases, you may have to pay a combination of both forms of charges.
Types of Fee
Paid To
Notes
Commission
Insurance agents
Calculated as a percentage of premium.
Fee-based
Insurance sales people or brokers
Sales people or brokers charge for their services.
Fee plus commission
Investment professional
Fee paid to an investment professional and commission for recommended product.
Source: CompuQuotes
Beyond the commissions and fees, there are other additional charges that may follow up. Before your purchase any policy, you may need to find out what they are and how they are going to be charged.
Charges
Purposes and Proceeds
Premium loads/sales charges
Compensates for sales and taxes expenses;
Deducted from your premium payment before it is applied to the policy.
Administration fees
Pays for the accounting and record-keeping expenses to maintain your policy;
Deducted from your policy value once a month
Mortality and expense risk charges
Compensates for risks that the insured person does not live to the assumed age;
Charged once a month
Cost of insurance
Cost of actual insurance protection, based on the insured individual’s age, gender, health and benefit;
Charged once a month
Surrender charges
If you surrender your during the surrender period;
Deducted from your policy cash value
Monthly per thousand charges
Based on the insured individual’s age, gender and underwriting classification;
Assessed every month
Fund management feels
Paid to investment fund managers for selecting investments and processing paper work;
Deducted from the price paid for the shares of underlying fund options, not cash value.
Source: Nationalwide
Tip:Make sure that you check the length of your surrender period. In addition, these fees and charges vary among products and companies. So please clarify with your insurance agent or investment professional for specific charges before you finalize your purchase.
Besides premiums paid to the insurance company, there are other fees and charges that you need to be well aware of as they may affect the value of the policy. Depending on the company and the policy, these fees and charges could be either deducted from your premium payment or from the cash value of your policy.