What Is an Administrative Charge?

An administrative charge is a fee charged by an insurer or other agency responsible for administering an insurance policy to cover expenses related to record-keeping and/or additional administrative costs. It is also referred to as an "administrative fee."

Key Takeaways

  • An administrative charge or fee is an expense charged to cover costs associated with opening, maintaining, changing, or closing an insurance policy.
  • Administrative charges should be defined upfront when an insured party first signs up for coverage.
  • Some charges may be universal for all policy-holders, such as initiation or termination fees.
  • Additional charges may arise if a policy-holder has a life-changing (marriage, changing jobs, buying a home) event mid-policy and want their coverage updated.

How an Administrative Charge Works

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 that discovering that great rate is all you must do to get an excellent insurance bargain. 

However, sometimes the unforeseen and inevitable happens—you change jobs, move to a new house, upgrade your car, or sell it. In such situations, you’ll need to let your insurer know to avoid invalidating your policy. Unfortunately, these types of cases can result in unanticipated administrative charges.

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.

Special Considerations

Sometimes, you can save on adjustment fees by making changes to your policy online. These charges are intended to cover the administration cost, so if you’re performing the administration yourself, there shouldn’t be a fee.

However, while most 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.