CDSCs operate in a way similar to withdrawal expenses. Other expenses may be met through implicit charges. The most common type of implicit charge is the company's crediting of accumulated contributions with an interest rate that is lower than the actual rate the company earns. The difference between what is paid and what is earned is used to cover expenses. The way expenses are charged against contracts vary from contract to contract and few generalizations can be made.
Some contracts provide certain guarantees.
Some funds provide guarantees of the principal. Such guarantees are most often associated with fixed funds and money market funds. As discussed in Chapter 10 on death benefits, some companies guarantee that the beneficiary receives a minimum death benefit equal to no less than the sum of contributions less withdrawals. This ensures that the death benefit is not affected by poor investment performance. Guarantees as to the maximum charges for administration, investment management, etc., are usually similar for all individual contracts and for all group contracts, but vary between individual and group.