Mortality and Expense Charge

The mortality and expense charge or “M&E” fee is charged by the insurance company and it is intended to cover the cost of death benefits (the “mortality” portion) and the expenses of other insured income guarantees that might be included with the annuity contract. The mortality expense involves the risk of the contract holder dying while the account balance is less than the total of premiums paid less any withdrawals. Again, the expense portion is intended to cover the costs of providing and administering any other insured features. Total M&E charges typically range from .40 to 1.75 percent per year, with an average of around 1.25 percent. Most insurers deduct this expense on an annualized basis. With variable annuities, the M&E fee is only applied to funds held in the separate accounts and not to any of the funds held in the general account. Also see glossary definitions for M&E fee and mortality and expense fee.