L&HNJmedium
Within an NJ-issued variable annuity, the mortality & expense risk (M&E) charge is most accurately characterized as:
An asset-based daily charge deducted from sub-account value compensating the insurer for mortality guarantees and operating expenses
BA federal excise tax on annuity income
CA front-end sales load deducted once from each purchase payment before allocation to sub-accounts, compensating the distributor for marketing costs and agent commissions
DA premium tax remitted to DOBI
Why this is the answer
M&E is deducted daily from the net asset value of the variable annuity sub-accounts, similar to a mutual-fund expense ratio. It compensates the insurer for assuming mortality risk (the death-benefit guarantee) and for general operating expenses, and is distinct from front-end loads, surrender charges, or premium taxes.
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