What Is a Mortality and Expense Fee?
A mortality and expense (M&E) fee is an annual charge expressed as a percentage of the account value, typically found in variable annuities. It compensates the insurance carrier for two things: the mortality risk it assumes (primarily through death benefit guarantees) and the expense of maintaining the contract and its administrative infrastructure.
Typical M&E Ranges
Variable annuity M&E fees generally range from 0.5% to 1.5% per year, though some older or more feature-rich products can be higher. The fee is deducted annually from the account value and reduces net returns.
M&E Fees in Fixed and Indexed Annuities
M&E fees as a named charge are far less common in fixed annuities and fixed indexed annuities. Instead, FIA carriers build their compensation into the product structure through caps, participation rates, and spreads. If you see an explicit M&E fee listed in an FIA contract, review it carefully with your advisor.
Why It Matters When Comparing Products
When comparing an annuity to an investment account, the M&E fee must be factored into total cost. A product with a 1.25% M&E fee plus rider charges plus underlying fund fees can carry total annual expenses of 2% to 3.5% or more. At that level, the cost must be weighed against the value of the guarantees provided.
This site focuses on fixed indexed annuities and MYGAs, which do not typically carry explicit M&E charges. If you are considering a variable annuity, reviewing total costs with a fee-only advisor is advisable.