do annuities have fees

Do Annuities Have Fees?

Sometimes clients ask, “Do annuities have fees?”

Well, some annuities come with fees no matter what. Others only have fees when you select certain added benefits. There is also sometimes a fee if you take out money too soon.

There are two main things that dictate whether you pay fees or not:

  • The type of annuity you have
  • The details of that individual annuity contract

Not all annuities have upfront fees. Some do, however. In this post, we’ll take a look at why this is the case. We’ll go over the different types of fees so you understand potential costs, types of annuities and how their fees differ, and if an annuity might be a valid option for you.

Common Fees

The most common fees associated with annuities fall into two categories: First, there are administrative fees. These include insurance fees or management fees. For certain annuities, the insurance company sets these fees in the contract. These fees aren’t optional. If you want that annuity, you pay that fee.

Second, there are optional fees. These include a surrender charge. In this case, you don’t have to pay a fee automatically. Instead, you pay a fee only if you take out more money than agreed upon, or earlier than is acceptable according to the contract. A rider fee is another optional fee, but isn’t paid due to a break in contract terms. A rider fee is something you agree to pay for an additional benefit, such as a death benefit. In both instances, the fees are due to the actions or choices of the annuity owner, rather than the insurance company.

Other Types of Fees

Depending on the details of your annuity contract, you might pay certain fees. There are other fees aside from the most common fees listed here. For example, annuities may have underwriting fees, which go to the issuing insurance company. There may also be a commission for the annuity to pay the licensed insurance agent. However, the annuity owner doesn’t typically pay upfront for these costs. Instead, the insurance company determines what their rate of return could be after taking the fees into account. In other words, you don’t pay for the underwriting or the commission, instead, the insurance company usually does and then adjusts your rate in accordance.

Fees Differ for Different Annuities

Three main types of annuities exist: Variable annuities, fixed annuities, and fixed indexed annuities (FIAs) Each type functions differently, and therefore comes with different fees. Here are the three types and how they differ from each other:

Fixed Annuities

A fixed annuity offers a set rate of return. This rate already takes into account the aforementioned fees, meaning you won’t usually see them in your agreement. However, surrender fees are still a possibility with a fixed annuity.

Variable Annuities

Of the three, variable annuities tend to have the most line-item fees. The most common of these include insurance charges, investment management fees, and flat contract fees. (Note: Because a variable annuity’s rate of return fluctuates, it also tends to have higher risks associated with it compared to other annuities.)


FIAs (Fixed Indexed Annuities) are another annuity type. With this product, the owner gets a reasonable rate of return over time, based on the performance of a certain index. However, unlike a variable annuity, an FIA doesn’t put your principal amount at risk. Regardless of the conditions of the stock market, your account can’t drop below the amount you’ve put into it. In terms of fees, FIAs are more like fixed annuities. Usually, the only fees are surrender charges and rider fees. Anything else counts as an expense to the insurance company, who then add it to their calculation of your rate of return.

Is an Annuity an Option For You?

Looking for more information about annuities? Want to learn about your options for protecting your money, even in the event of a market downturn? Contact us today. We’re always here to help!

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