A mortality and expense risk charge, universally shortened to M&E, is an annual percentage that a variable annuity or variable life insurance company deducts from the value of your separate-account investments to compensate itself for two promises: the insurance guarantees in the contract, and the risk that its own administrative costs run higher than it assumed. It is quoted as a percentage of assets, accrued daily, and it is charged whether the market goes up, down or sideways.
Unlike a premium, an M&E charge never appears as a bill. It is subtracted before you see the number, which is exactly why so few owners of variable contracts can say what theirs is. The purpose of this page is to walk you to the specific documents where the figure is printed and show you how to read it.
Typical M&E charges on variable annuities have long been quoted in a range of roughly 0.95 percent to 1.65 percent a year, with industry averages commonly cited near 1.25 percent; variable universal life contracts express the charge differently and it must be read from the contract’s own schedule. Those ranges are as of 2026 and describe the market, not your contract. The only authoritative figure is the one in your prospectus fee table or policy schedule. Pine Lake Legacy provides education and a free policy review only, and does not give investment or tax advice.
In This Article
Document One: The Prospectus Fee Table
This is where the number actually lives. Variable annuities and variable life insurance are securities as well as insurance, registered with the Securities and Exchange Commission, and each contract carries a prospectus with a standardized fee table near the front.
Look for a heading such as Annual Contract Expenses or Separate Account Annual Expenses. The M&E risk charge is listed there as a percentage of average daily net assets, usually beside a separate administrative expense charge in the range of about 0.10 to 0.30 percent. Below that table you will find a second one covering the annual operating expenses of the underlying investment portfolios — those are additional, and they are frequently larger than the M&E itself.
Since the SEC’s variable contract summary prospectus rule took effect in 2020, many contracts now deliver a short summary prospectus with a key information table up front, with the full statutory prospectus available on request. Either version contains the fee table. If you cannot locate yours, the carrier must provide one; ask for the prospectus in effect for your contract, and ask for the current fee schedule if the contract has been amended.
Document Two: The Annual Statement
The second place is the anniversary statement the carrier mails or posts each year. On a variable annuity it will typically show the contract value at the start and end of the period, purchase payments, transfers, withdrawals, and a line for contract charges deducted. On a variable universal life policy the statement usually itemises deductions month by month: cost of insurance, administrative charge, premium load, rider charges, and the separate account charge.
Do the arithmetic once. If a contract holds $180,000 in separate account value and carries a 1.25 percent M&E, that is roughly $2,250 a year, before the underlying fund expenses and before the cost of insurance on a life contract. Over ten years at a flat balance that is roughly $22,500. Nobody sends you a bill for it, which is precisely why it goes unexamined for decades.
Compare the statement to the fee table. If the deducted amount does not reconcile, call and ask for a breakdown in writing. Our page on reading the annual statement line by line walks through each field.
Document Three: The In-Force Illustration
The third document is the one families should request and almost never do. An in-force illustration projects the policy forward from today’s actual values under a stated set of assumptions, and on a variable contract the M&E charge is baked into those projections.
Request two versions. One at the current assumed rate of return, and one on the guaranteed basis, meaning the worst the carrier is contractually permitted to do. On a variable universal life policy the guaranteed-basis run frequently shows the policy lapsing years earlier than the current-basis run, and the M&E charge plus the cost of insurance is a large part of why. That gap is the single most important number in the whole file, because it tells you how much of the policy’s survival depends on things the carrier can change.
Also ask what happens if you stop paying, and at what age the projections show the account value reaching zero under each assumption. Our page on illustration versus reality covers what these projections do and do not promise.
| Charge | How It Is Calculated | Typical Range | Where to Find It |
|---|---|---|---|
| Mortality and expense risk | Annual percentage of separate account value, accrued daily | About 0.95%–1.65% a year | Prospectus fee table |
| Administrative expense | Percentage of assets or flat annual fee | About 0.10%–0.30%, or a flat contract fee | Prospectus fee table |
| Underlying fund expenses | Expense ratio inside each subaccount | Varies widely by fund | Second prospectus fee table |
| Cost of insurance | Monthly rate per $1,000 of net amount at risk | Rises sharply with attained age | Policy schedule and annual statement |
| Surrender charge | Declining percentage of withdrawals for a set number of years | Often starts high and grades to zero | Policy schedule |
Terms M&E Is Confused With
This is where most of the damage happens, because five different deductions get lumped together as fees.
M&E vs. cost of insurance. The cost of insurance is a monthly deduction based on the net amount at risk, the insured’s age and the carrier’s current COI rate scale. It rises steeply with age. M&E is a flat percentage of assets and does not care how old you are. On an older variable life policy the COI, not the M&E, is usually the charge that eventually drains the contract.
M&E vs. the fund expense ratio. The underlying subaccounts charge their own management fees, which are deducted inside the fund and stack on top of the M&E.
M&E vs. surrender charge. A surrender charge is a one-time penalty for taking money out during a declining schedule of years. M&E is ongoing and unavoidable.
M&E vs. a mortality multiplier. A mortality multiplier is a life expectancy underwriting term used in the secondary market. The two share a word and nothing else.
M&E vs. a rider charge. Living benefit and death benefit riders on annuities carry their own separate charges, commonly quoted in the range of 0.25 to 1.50 percent, and they are not included in the M&E line.
What the Charge Is Actually Buying
It is fair to ask. On a variable annuity, the M&E is generally described as paying for the guaranteed death benefit, which typically promises beneficiaries at least the amount invested less withdrawals even if the market has fallen, and for the carrier’s promise to keep annuity purchase rates and certain expense charges from rising above contractual maximums.
Whether that is good value depends entirely on the contract and the owner. A guaranteed minimum death benefit has real worth for someone whose beneficiaries depend on it and whose account is under water. It has very little worth for a contract whose value is far above the guaranteed floor, or for an owner with no beneficiary need at all, and in that second case the charge is buying a guarantee that will never pay.
Two honest checks. First, ask the carrier what the guaranteed death benefit is today versus the account value; if the account value is well above the guarantee, you are paying for insurance you are not using. Second, ask what a 1035 exchange to a lower-cost contract would cost in surrender charges and what guarantees you would forfeit. That is a question for a fee-only advisor and, if taxes are involved, your CPA. Do not take it from a salesperson whose compensation depends on the answer.
Where This Lands on a Keep, Reduce, Surrender or Sell Decision
For variable universal life specifically, the M&E charge belongs in the same analysis as every other drag on the contract, and the practical decision runs in this order.
Keep it if the death benefit is still needed and the in-force illustration shows the policy holding to a realistic age under conservative assumptions. Reduce it if the coverage is more than the family needs; lowering the face amount lowers the net amount at risk and therefore the cost of insurance, though it does not change the M&E percentage.
Surrender it if there is real cash value, no continuing need, and no secondary-market interest. Be aware of the tax consequence: gain above basis on a life insurance surrender is generally ordinary income, and your CPA should run the number before you sign anything.
Have it reviewed for market value if the insured is older or in declining health and the death benefit is substantial. A policy whose charges are eating it alive is a policy on a clock, and the secondary market prices health, not company loyalty. Small policies and healthy insureds generally do not attract offers, and you should be told that rather than strung along. Pine Lake Legacy does not purchase policies; we provide a free review at (732) 978-9575 or from the policy cover page, and we will tell you plainly when the answer is no.
Frequently Asked Questions
Where exactly do I find my M&E charge?
In the prospectus fee table, under a heading such as Annual Contract Expenses or Separate Account Annual Expenses, expressed as a percentage of average daily net assets. If you no longer have the prospectus, ask the carrier for the one in effect for your contract and for the current fee schedule if the contract has been amended.
Is the M&E charge the same as the cost of insurance?
No. Cost of insurance is a monthly deduction based on the net amount at risk and the insured’s attained age, and it climbs steeply as the insured gets older. The M&E charge is a flat percentage of separate account assets that does not vary with age. On older variable life policies, cost of insurance is usually the bigger drain.
Can the carrier raise my M&E charge?
The contract states a guaranteed maximum, and the carrier may charge up to that maximum. Many contracts have historically charged the maximum from the start, in which case there is no room to rise. Read the schedule for both the current and the guaranteed figure, and ask the carrier in writing which one you are paying today.
Do fixed universal life or whole life policies have an M&E charge?
No, not by that name. Those contracts carry cost of insurance, expense charges, and an interest crediting spread instead. If a service representative uses the term on a fixed policy, ask them to point to the line in the policy schedule, because the charge structure on a non-variable contract is genuinely different.
Should I do a 1035 exchange to get a lower M&E?
Maybe, and it is not a decision to make on the fee alone. Weigh surrender charges you would trigger, guarantees you would forfeit, new surrender periods you would start, and the health underwriting a new life policy would require. Bring the analysis to a fee-only advisor and your CPA before acting.
Does a high M&E charge affect what my policy could sell for?
Somewhat. A secondary-market buyer projects the total cost of carrying the policy to maturity, and high internal charges raise that cost and therefore reduce what a buyer will pay. The dominant factors are still the death benefit and the insured’s projected life expectancy, not any single fee line.
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Related Reading
- What Is Cost Of Insurance
- Surrender Charge Schedule
- What Is A Mortality Multiplier
- What Is An In Force Illustration
- Annual Statement Line By Line
- Policy Illustration Vs Reality
- What Is Longevity Risk
Pine Lake Legacy does not purchase life insurance policies and does not provide legal, tax, or investment advice. Information provided is for educational purposes only. Eligibility for any option, including life settlements, is not guaranteed and depends on individual circumstances, policy terms, underwriting, and market conditions. Consult independent legal, tax, or financial professionals before making decisions regarding a life insurance policy.