For Consumers

How much do annuities cost?

There are fees and charges you must pay annually. Before you buy, make sure you understand and ask questions about the fees and charges.

Annuity expenses can be 3 percent or more per year. Make sure you understand all the fees and charges before you buy. The fees often include:

  • Surrender charges - If you cancel or cash out the policy early you must pay a surrender charge. This charge is typically highest in the early years of the annuity and may be reduced or eliminated over time. Surrender charges commonly range from 5 to 25 percent of the amount withdrawn. The average surrender charge period is seven years.
  • Mortality expenses - This is a fee charged by the insurance company to provide you with a death benefit on the contract.
  • Administrative expenses - Many policies have a separate administrative fee to cover the costs of mailings and ongoing service.
  • Investment-expense ratio - The underlying stock or bond account (variable annuities) will have an annual investment management fee.
  • Additional costs of riders - Riders are extra features on your policy that provide you with additional guarantees or death benefits.