• Sales charges or front-end load: These are deductions for salesman distribution expenses. These charges can consume anywhere from 0 percent to 10 percent of new money or premiums invested in the policy.
• State premium taxes:These taxes vary by state and range from 0 percent in Oregon to 5 percent in the Virgin Islands (ibid. p. 113). Currently, Utah’s state premium tax is 2.25 percent.
• Deferred acquisition taxes (DAC):DAC tax is a corporate federal income tax that is imposed on insurance companies. Previously, insurance companies wrote off all their acquisition expenses in the first year, thereby reducing taxable income. Now companies must spread out these acquisition expenses over the life of the acquisitions. By doing this, income is generated in the early years and income taxes are incurred. These taxes are passed on to the insured.
• First-year expenses:First-year administration fees are higher than the fees for succeeding years because the first-year fees include the cost of setting up the policy.
• Monthly administrative fees:These fees enable the insurance company to provide continuing services such as mailing confirmation notices and providing periodic reports.
• Mortality and expense charges:These fees compensate the insurance company for certain mortality and expense risks and can range from 0.4 percent to 1.3 percent annually.

Figure 6