An annual insurance fee covers mortality and expense risk charges and other administrative expenses. It also provides for a guaranteed death benefit and for lifetime guaranteed income payouts. Annual fees are usually smaller than upfront charges and are often considered less important, but this isn’t really the case. The percentage of the annual fee may be small but remember your investment or policy may reasonably be expected to grow and, assuming it does, then the amount of money you actually pay in annual management charges grows with it even though the percentage levy remains unchanged. It is important to consider special offer investments; these investments often waive the initial charge but have an annual fee that is considerably higher.
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