Administrative Charge

What Does Administrative Charge Mean?

An administrative charge is a fee that an insurer requires clients to pay to cover the costs of various administrative activities involved in maintaining their insurance accounts for certain types of policies. These activities may include record-keeping, data filing, and other related tasks. This is one reason why two policies with similar coverage can carry different total costs, and it is worth looking at when reviewing how business insurance premiums are calculated.

Administrative charges are also referred to as administrative fees.

Insuranceopedia Explains Administrative Charge

Without administrative charges, insurers would need to use premium profits to pay employees responsible for various administrative tasks. To avoid this, they charge administrative fees, typically billed on a quarterly or annual basis, for policies such as group employee benefit plans. These charges help insurers maintain these policies without relying solely on premium income. For owners weighing the full cost of a group plan, admin fees should be added on top of the premium itself when comparing quotes, since they affect what you actually pay for small business insurance.