What is the Mortality and Expense (M&E) risk charge?

What is the Mortality and Expense (M&E) risk charge?

• A. An upfront fee charged at policy issue.
• B. A fee charged when the contract is surrendered.
• C. An ongoing fee to cover insurance guarantees and policy administration, expressed as a percentage of the contract value.
• D. A tax on earnings within the separate account.

Answer: (C)

The main idea is that the Mortality and Expense (M&E) risk charge is an ongoing fee that the insurer deducts to cover the costs of providing death benefits (mortality risk) and the ongoing administrative guarantees and expenses (expense risk) of the contract. It’s charged regularly and expressed as a percentage of the contract value, so it reduces the account value over time regardless of how the investments perform. This is not a one-time charge at issue, not a charge only when you surrender, and not a tax on earnings inside the separate account.

The main idea is that the Mortality and Expense (M&E) risk charge is an ongoing fee that the insurer deducts to cover the costs of providing death benefits (mortality risk) and the ongoing administrative guarantees and expenses (expense risk) of the contract. It’s charged regularly and expressed as a percentage of the contract value, so it reduces the account value over time regardless of how the investments perform. This is not a one-time charge at issue, not a charge only when you surrender, and not a tax on earnings inside the separate account.