Subaccount Charge
What Does Subaccount Charge Mean?
A subaccount charge is a management fee applied for services provided to an investment fund. In the context of insurance, a subaccount is utilized in insurance products that have variable features. By maintaining multiple subaccounts, a policyholder can invest in a variety of portfolios, thereby enhancing their potential future annuity payout.
Insuranceopedia Explains Subaccount Charge
A subaccount is an account distinct from the general account in an investment option. In the case of insurance, the firm maintains this account to facilitate the management of its operations. The insurance company may choose to manage the account internally or contract an external firm for its management. When the insurance company manages the account, it generates additional revenue by charging a fee.
Subaccount charges encompass various expenses and fees associated with the investments managed in a variable annuity, including management fees, operating expenses, distribution fees, and mailing services, among others. The charge for maintaining a subaccount can be calculated as a percentage of the total account value on an annual basis. Additionally, the type of fund may influence the fee structure. The insurance company reserves the right to change the funds to a preferred account and must notify the policyholder of this change. If the policyholder does not update the account details as specified, the funds will be transferred to a replacement fund with similar objectives to the original subaccount.
