Annuities are complicated, and so is the fee
structure.
Fixed annuities and equity indexed annuities
have no up-front charges. The insurance company will recuperate the
amount of money it is required to pay on by investing the assets in
the annuities.
Variable annuities have three elements to their
fees: the "mortality and expense" fee (M&E), the subaccount fee
and the annual contract maintenance charge.
The M&E covers the insurance expenses. These
include the risk the insurance company assumes to pay you a lifetime
of income, the death benefit and the commission paid to the agent or
broker who you purchased the contract from.
The subaccount fee is used to cover the cost of
managing your investment accounts. The annual contract maintenance
fee is a flat fee that is usually around 2.12% of the total annuity
amount.
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