Nothing in this walkthrough requires information you do not already have. Every charge described below is stated in the contract you were given at purchase and, for variable contracts, in the prospectus that accompanied it. The work is locating each line and adding them up.
The charges to locate
Mortality and expense (M&E) charge
In variable annuities, an annual charge taken as a percentage of account value, compensating the insurer for the insurance risk it assumes under the contract. It is listed in the fee table by that name or as a separate-account charge.
Administrative and contract charges
Most contracts carry an annual contract maintenance fee — often a flat dollar amount, sometimes waived above a stated account value — and some add an asset-based administrative charge on top. Both appear in the fee table.
Rider charges
Each optional benefit — income riders, enhanced death benefits, long-term care provisions — carries its own ongoing charge, listed separately in the contract. Riders are where contract cost quietly accumulates. Every rider you are paying for should be one you understood when you bought it, and still use.
Subaccount expenses
The investment options inside a variable annuity are funds with their own expense ratios, layered on top of the contract-level charges above. Their fee tables are in the prospectus.
The surrender schedule
The contract states a surrender charge — a percentage applied to withdrawals above any free-withdrawal allowance during the surrender period, typically declining each contract year until it reaches zero. Locate the schedule, mark which contract year you are in, and note the date the period ends. That one table answers what it costs to change your mind.
Adding it up
The all-in annual cost of the contract is the sum of the layers: M&E, administrative charges, every active rider, and the subaccount expenses underneath. No single line in the contract states that total — which is exactly why it is worth computing. Write the figure down with the date; it becomes the baseline for every future review of the contract.
Where to find each document
The contract itself arrived at purchase, and the insurer will reissue a copy on request. Variable contracts also carry a prospectus, updated annually and available from the insurer or its website. Annual statements summarize the charges actually deducted — useful for checking the fee table against reality. If a rider was added after purchase, its terms arrived as an endorsement or amendment; collect those too, because the original contract will not mention them.
Questions to ask
- Ask for your all-in annual cost, in writing, as one figure.
- Ask which riders you are paying for, what each one does, and whether you use it.
- Ask where you stand on the surrender schedule and what the free-withdrawal provision allows.
- Ask how the charges change if you annuitize.
This material is educational only. It is not investment or insurance advice, and it is not a recommendation for or against any product — refer to your own contract and prospectus for their actual terms.