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Life Insurance

Charges, Fees And Deductions In ULIP

ULIPs are ideal for those who are looking for both protection and investment. However, there are certain charges involved in it. So, before buying a ULIP, it is important to know all these charges. 


What are the Charges, fees and deductions in a ULIP?

Different insurance companies have varying charge structures in ULIPs. 

Herein, you will learn about the different types of fees and charges which are generally deducted from the fund value by extinguishing the units of the investor. Note that the insurers have the right to revise fees and charges over a period of time.


i. Premium Allocation Charge

Premium Allocation Charge is deducted as a fixed percentage from the premium paid in the initial years of the policy. This is charged at a higher rate. The charges include the initial and renewal expenses and intermediary commission expenses. It is a front load charge as it is deducted from your premium paid.


ii. Mortality Charges

This charge is to provide for the insurance coverage under the plan. Mortality charges depend on a number of factors like age, amount of sum assured, etc., and is deducted on a monthly basis.


iii. Policy administration charges

This charge is levied for the administration of the policy and it is deducted on a monthly basis by the cancellation of units from all funds chosen. This charge can be levied at a fixed rate or as a percentage of your premium.  


iv. Fund Management Charges

Fund Management Charge is the fee imposed by the insurance company for the management of the various funds in the ULIP. It is levied for the management of the funds and is deducted before arriving at the NAV figure. The maximum charge allowed is 1.35 percent per annum of the fund value and is charged daily. Generally, insurers levy the maximum amount allowed in equity funds, while the charge on non-equity funds is much lower.


v. Partial Withdrawal Charge & Surrender Charge

ULIPs have the option of partial withdrawals & surrender of funds. These withdrawals can be free for up to a certain limit or you can be charged based on your transactions. Both partial withdrawal and surrender of fund or plan are subject to certain terms and conditions.


vi. Switching your funds

The moving of investment between different fund options is called switching. There are options to switch your funds for free up to a certain limit per year. Any further changes might incur a charge of  ₹100 - ₹250 per switch. Charges may differ from company to company.

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