Mortality Charge
Terms related to the financial mechanics, value, and tax treatment of policies.
What Is Mortality Charge?
A mortality charge — synonymous with cost of insurance (COI) — is the monthly fee deducted from the cash value of a universal life or indexed universal life policy to pay for the pure death protection. The charge is calculated based on the net amount at risk (the difference between the death benefit and the accumulated cash value), the insured's age, gender, and health classification. Mortality charges increase every year as the insured ages, because the statistical probability of death rises. In IUL policies, mortality charges are one of the most significant ongoing fees and must be carefully projected in long-term illustrations, especially at older ages.
Nevada Context
Nevada regulations require that IUL and UL policy illustrations clearly show projected mortality charges at each policy year, helping Nevada consumers understand how charges escalate over time.
How It Affects You
Rising mortality charges in UL and IUL policies can erode cash value over time, particularly if the policy is underfunded or credited rates are below projections. Understanding this trajectory is essential before purchasing any UL-based policy.
Mortality Charge in Practice
A Nevada IUL policyholder pays an illustrative $25/month in mortality charges at age 45; by age 65, the same coverage may cost $95/month in COI deductions — highlighting the importance of adequate funding in earlier years.
Dollar amounts shown are illustrative. Actual amounts vary by carrier, applicant age, health status, and individual underwriting.
Related Glossary Terms
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