Mortality Charge

Example

“Jennifer's universal life insurance policy shows a monthly mortality charge of $73, which covers the cost of her $250,000 death benefit and increases each year as she ages.”

Memory Tip

Think 'Mortality Charge = Money for Coverage' - it's the fee you pay for the life insurance protection part of your policy.

Why It Matters

Mortality charges significantly impact the cash value growth of permanent life insurance policies, especially as you age and the charges increase substantially. Understanding these charges helps you evaluate whether permanent life insurance is cost-effective compared to term life insurance plus separate investments.

Common Misconception

Many policyholders don't realize that mortality charges increase dramatically with age, thinking they pay a fixed cost for life insurance coverage throughout the policy's life. In reality, these charges can become so expensive in later years that they consume most or all of the policy's cash value growth.

In Practice

Robert has a $500,000 universal life policy that charges $125 monthly for mortality costs at age 45. By age 65, this charge has grown to $487 monthly, and by age 75, it reaches $1,342 monthly. If his cash value isn't growing fast enough to cover these increasing charges, his policy could lapse. Over 30 years, he'll pay approximately $185,000 in mortality charges alone, not counting other policy fees and expenses.

Etymology

Combines 'mortality' from Latin 'mortalis' meaning subject to death, with 'charge' meaning a fee or cost imposed for a service.

Common Misspellings

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