Cost of Insurance

Last Updated: July 15, 2017

Definition - What does Cost of Insurance mean?

Cost of insurance is a fee associated with certain types of life insurance, such as variable and universal life insurance. Different from premiums, these charges are billed to pay for administration, mortality and other responsibilities of the insurer. The amount is determined by the risk class and age of the policyholder.

Insuranceopedia explains Cost of Insurance

Cost of insurance charges tend to increase as a life insurance policyholder gets older. This is largely because as the policyholder ages, the more likely they are to die and thereby require the insurer to pay out a death benefit. The risk can be further compounded if the policyholder has had a stroke, suffers from heart disease or diabetes, smokes, or is fond of dangerous activities, such as skydiving. Cost of insurance fees are typically charged on a monthly basis.

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