What is a Policy Fee?
A policy fee is an additional fee that the insured is required to pay beyond the policy premiums. Not all insurance companies charge a policy fee, but those that do generally use the fee to cover the administrative costs associated with establishing a new policy or payment method.
Why do policy fees exist
If you’re already paying premiums for your insurance policy, you might be confused why there’s an additional fee at play. Your premiums should cover the cost of managing your policy over time, right?
They should, but there may come times when your policy needs additional attention from the insurance company. To ensure they get compensated for that extra time, they may charge a policy fee.
For example, policy fees are relatively common when first buying a life insurance policy. They usually come in the form of a one-time, flat-rate charge. The insurance company then applies that fee to the costs associated with getting your new policy set up, like:
- Issuing the policy paperwork
- Setting you up in their payment system
- Establishing the necessary records
You might also see a policy fee when establishing a new mode of payment with your insurer to offset the administrative costs associated with setting up that new billing method.
The price of policy fees
Some insurance companies don’t charge policy fees. That doesn’t necessarily mean their policies are cheapest, though. They may simply be wrapping additional costs in the policy premiums rather than setting them as a separate policy fee.
Even if your coverage does come with policy fees, they’re generally fairly nominal (e.g., $10, $35). They also usually set fees that stay the same, no matter the size of the death benefit associated with the policy you’re buying. In other words, getting more coverage won’t necessarily mean you’re stuck with a higher policy fee.
The policy fee will always be rolled into the premium, so you’ll never have to pay more than the stated premium. It’s more of a “behind the scenes” piece of information to know.