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💰 '''Mortality charge''' is the cost deducted from a [[Definition:Life insurance | life insurance]] policy's [[Definition:Cash value | cash value]] or account balance to cover the insurer's obligation to pay the [[Definition:Death benefit | death benefit]] if the [[Definition:Policyholder | policyholder]] dies during a given period. Sometimes referred to as the "cost of insurance" (COI), this charge reflects the pure price of the [[Definition:Mortality risk | mortality risk]] the [[Definition:Insurance carrier | insurer]] assumes and is most visible in [[Definition:Universal life insurance | universal life]] and [[Definition:Variable life insurance | variable life]] policies, where it appears as a line item on periodic policy statements.

🧮 The amount of the mortality charge depends on several factors: the insured's [[Definition:Attained age | attained age]], gender, health classification at the time of [[Definition:Underwriting | underwriting]], and the net amount at risk — the difference between the current death benefit and the accumulated cash value. Each month, the insurer calculates the net amount at risk and applies a mortality rate drawn from internal [[Definition:Mortality table | mortality tables]] or the policy's guaranteed maximum rates. As the insured ages, mortality charges naturally increase because the probability of death rises. Simultaneously, if the cash value grows, the net amount at risk may decrease, partially offsetting the higher per-unit cost. Policyholders who elected a level death benefit option will generally see this dynamic play out, whereas those with an increasing death benefit may face compounding charge growth.

📉 Understanding mortality charges matters enormously for long-term policy performance. In [[Definition:Universal life insurance | universal life]] contracts, persistently low [[Definition:Credited interest rate | credited interest rates]] combined with rising mortality charges can erode cash value faster than policyholders expect, potentially leading to [[Definition:Policy lapse | lapse]] if no additional [[Definition:Premium | premiums]] are paid. [[Definition:Insurance producer | Producers]] and financial planners must stress-test illustrations to ensure that policies can sustain themselves under various interest-rate and charge scenarios. For insurers, the mortality charge is a critical revenue component that must be calibrated against actual [[Definition:Mortality experience | mortality experience]] — charging too little threatens profitability, while charging too much invites competitive displacement and regulatory scrutiny over policy performance.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Cost of insurance]]
* [[Definition:Cash value]]
* [[Definition:Net amount at risk]]
* [[Definition:Universal life insurance]]
* [[Definition:Mortality table]]
* [[Definition:Death benefit]]
{{Div col end}}

Definition:Mortality charge - Revision history

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