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In general, distribution cost refers to the charges arising from the marketing and sale of a product or service. In like manner, insurance companies use it to provide insights on the agent’s commission, as well as the fees paid to the distribution channel.

On the whole, the insurance company will inform you on the fees involved in one of the following ways:

1. Product Summary

Firstly, it is stated in a line or two in the product summary.

Type of Policy: Commonly found in accident and health insurance policies

Here is an excerpt from the product summary of an integrated shield plan:

The total distribution cost of this product is 74% of additional private insurance coverage premiums for the first year, and 5% to 11% of additional private insurance coverage premiums for renewal years.

2. Policy Cover Page

Secondly, you can find a summary of the cost on the policy cover page. In most cases, it is at one of the sections within the first two to three pages of the policy cover page.

Type of Policy: Commonly found in participating whole life, endowment, term insurance policies

How much will you need to pay for advice?

The Total Distribution Cost for this plan is $3,597 as shown in the Policy Illustration. This makes up 7.19% of the total premiums payable.

3. Policy Illustration

Finally, you may also find the cost within the policy illustration itself. In this case, the total distribution cost is presented in a table format.

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Type of Policy: Commonly found in participating whole life, endowment, term, investment-linked policies

How much are you paying for distribution costs?

This table shows the total costs of distribution that the insurance company expects to incur in relation to your policy, including the cost of any financial advice provided to you.

I have included a sample table in the post’s infographic as an illustration.


All things considered, consumers do not have to pay an additional cost for distribution. Instead, it has already been taken into account during the pricing of the policy itself. All in all, different insurance companies have different considerations when pricing their policies.

Share Your Thoughts 💭

1️⃣ Is it possible to have low distribution cost and high benefits in an insurance policy?

2️⃣ To what extent does distribution cost affect your decision in selecting an insurance policy?

3️⃣ What are your factors for consideration when you select an insurance policy?

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