A contract fee is a flat dollar amount charged either once or annually on an annuity contract. It is one of several charges that may reduce the value of a fixed deferred annuity.
The NAIC explains that most annuities have charges related to the cost of selling or servicing the contract. These charges may be subtracted directly from the contract value. A contract fee is different from a surrender or withdrawal charge because it is not tied to taking money out. Instead, it is simply a stated flat dollar charge.
It is also different from other possible annuity charges. For example, a transaction fee is charged per premium payment or other transaction, and a percentage of premium charge is deducted from each premium paid. Some states also charge a premium tax, which the insurance company may subtract at different times under the contract.
Because charges can vary from one annuity to another, the NAIC says you should ask your agent or the company to describe the charges that apply to your annuity. You should also read the contract and disclosure carefully so you understand how any fee may affect your annuity’s value over time.
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Educational content provided by Jeffrey Scott McLeod, LUTC, National Insurance Producer License #558629. This is for informational purposes only and is not a recommendation to buy or sell any annuity. Guarantees are subject to the claims-paying ability of the issuing insurance company. Always consult your own advisor and read the full NAIC Buyer’s Guide. For residents of your state.
Source: © 2025 National Association of Insurance Commissioners (NAIC). Reprinted with permission. Further reprint or distribution strictly prohibited without written permission of NAIC.
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