All contracts have expense charges, some more identifiable than others.
The insurance companies employ two basic approaches to the collection of these charges, explicit and implicit. Explicit expense charges are direct, visible expense charges which may be regularly applied throughout the year. Explicit charges may also be activated only when a specific event occurs, such as when a loan is taken out or when a partial or full withdrawal is made. For example, some expenses are charged on a periodic basis, perhaps monthly or annually, to pay for investment management and guarantees. Account opening and upkeep fees are assessed by the company to cover the costs of opening and maintaining the account and to make a profit.