When you get a life insurance quote, you typically expect that quote to accurately reflect the amount you’ll pay for your policy. And, in most cases, it is. However, life insurance policies may include various fees that are not always immediately apparent to policyholders.
These fees are often referred to as "hidden fees" because they might not be explicitly highlighted in the policy documentation or marketing materials. It's important for individuals considering life insurance to understand and be aware of potential fees that could impact the policy's overall cost and performance. Let’s walk through common fees and charges you may encounter when buying life insurance.
Life Insurance Fees and Charges
The fees you encounter when purchasing life insurance will vary depending on a variety of factors. For example, the type of policy you buy can result in different charges and fees. Others may vary by life insurance carrier. Some common fees associated with life insurance policies include:
Cost of insurance, or the actual cost of life insurance protection. Insurers determine this amount using your age, gender, health, and death benefit. This is the base cost of your life insurance policy.
Administration fees help pay the costs of maintaining your life insurance policy, such as accounting and recordkeeping. To save money on these fees, choose to pay your premiums quarterly instead of monthly. This limits the amount of work that occurs on the part of the insurance company.
Premium loads and sales charges help compensate the insurance company for the cost of sales expenses and taxes.
A monthly per thousand charge is assessed monthly and is based on your age, underwriting classification, and gender.
A surrender charge is only applicable to whole life and other permanent life insurance policies. If you surrender/terminate your policy during a specific surrender charge period, the insurance company will deduct this from your policy’s cash value. If you’re buying permanent life insurance, verify the length of your surrender charge policy before you make your purchase.
Fund management fees are used to pay fund managers for their work. These fees are typically deducted from the price paid for underlying fund options and not directly from the cash value of your policy. If you’re looking to add a permanent life insurance policy with a market component to your overall investment portfolio, you’ll want to pay close attention to this type of fee.
A mortality and expense risk charge compensates the insurance company if you don’t live to an estimated age determined by the insurance company. The insurance company will make this determination based on your age, gender, and health. The mortality and expense risk charge is usually assessed once a month.
Are there hidden fees in life insurance?
Most of the life insurance fees listed above will be included in your policy and, therefore, found on your monthly or quarterly statements. It can be helpful to thoroughly review your policy documentation and seek professional advice to understand the potential impact of these fees. However, you may still be wondering about other hidden costs.
One of the best ways to ensure you’re not surprised by any fees or charges related to your life insurance policy is to work with a licensed insurance agent. SelectQuote’s experienced licensed insurance agents offer unbiased guidance to help you understand what you’re paying and why. We’ll help you navigate the complexities of life insurance policies, including understanding the impact of fees and how to choose a policy that aligns with your financial needs.
Have questions about fees associated with your life insurance policy? SelectQuote can help.
With so much information available about life insurance, navigating questions about charges and fees can be tricky. Let us make it easy. Our licensed insurance agents will gather and compare a variety of life insurance quotes in just minutes, helping you make sense of the fine print so you can be as informed as possible about your coverage.
