Which item is a premium deduction that is not a separate account charge?

Which item is a premium deduction that is not a separate account charge?

• A. Admin fees
• B. Mortality expense
• C. Investment mgmt fee
• D. Expense risk fee

Answer: (A)

The main idea is understanding how charges are applied in a variable annuity: some costs come directly out of the premium you pay, while others are deducted from the contract’s separate account value over time. Admin fees are a premium deduction. They’re taken from the premium at funding to cover administrative costs, so the amount actually credited to the contract is reduced right away. They’re not charged against the separate account as ongoing investment expenses. The other items—mortality expense, investment management fee, and expense risk fee—are typically charged against the separate account value. They reduce the account’s value over time rather than reducing the premium at the outset. For example, after funding, ongoing charges like these erode the contract value as the subaccounts perform. So admin fees fit the description of a premium deduction, while the others are ongoing separate account charges.

The main idea is understanding how charges are applied in a variable annuity: some costs come directly out of the premium you pay, while others are deducted from the contract’s separate account value over time.

Admin fees are a premium deduction. They’re taken from the premium at funding to cover administrative costs, so the amount actually credited to the contract is reduced right away. They’re not charged against the separate account as ongoing investment expenses.

The other items—mortality expense, investment management fee, and expense risk fee—are typically charged against the separate account value. They reduce the account’s value over time rather than reducing the premium at the outset. For example, after funding, ongoing charges like these erode the contract value as the subaccounts perform.

So admin fees fit the description of a premium deduction, while the others are ongoing separate account charges.