What is Administrative Charge
An administrative charge is a fee charged by an insurer or other agency responsible for administering a group employee benefit plan to cover expenses related to record keeping and/or other administrative costs. It is also referred to an an "administrative fee."
BREAKING DOWN Administrative Charge
Altering an insurance policy mid-term can result in costly administrative charges. Consider a scenario in which you’ve compared prices and found a great insurance deal. You might think finding that great rate is all you must do to get a great insurance bargain. However, sometimes the unforeseen and inevitable happen – you change jobs, you move to a new house, you upgrade your car or you sell it. In such situations, you’ll need to let your insurer know to avoid invalidating your policy. Unfortunately, these types of situations can result in unanticipated administrative charges.
But changing your life situation isn't the only way unforeseen administrative charges can reveal themselves. A July 2014 study showed that between 2011 and 2014, 13 of 28 insurers analyzed had raised fees while eight had introduced new ones. It also discovered that cancellation fees had gone up by almost 20% in the three-year period. In addition, the study concluded that a quarter of those who paid insurance administrative charges didn’t expect them and only one in three thought the fees were clear before they bought the policy. If you think you’ll need to change an insurance policy mid-term, it’s a good idea to make sure you know what fees might apply, so you can factor them into your decision.
Adjustment Administrative Charges
Some changes you might make during the term of an insurance policy would include:
- Moving houses
- Changing your vehicle
- Getting married and changing your name
- Getting a new job
- Making modifications to your car
- Increasing or decreasing your annual mileage
Although you might think some of the changes you make would lead to a reduction in your premiums, in many cases, making changes will still lead to an increase in what you pay. This is because insurers often apply an adjustment fee for any changes made, and this fee can be quite significant.
Save by Going Online
Sometimes, you can save on adjustment fees by making changes to your policy online. These charges are intended to cover the cost of administration, so if you’re performing the administration yourself, there shouldn’t be a fee.
However, while the majority of policies can be purchased online, only some allow a customer to make changes for themselves online. And even if you can make the changes yourself online, it might still cost you – many policies that allow you to make changes online still charge fees for doing it yourself. Some providers only charge fees if you make changes over the phone. For others, online changes are free.