Insurance Charges

Be aware of the charges that need to be paid in unit-linked insurance plans. Levied for the various functions served by these policies, they take slices out of your benefits

What are the charges in Ulips?
Broadly, charges are levied in unit-linked insurance plans (Ulips) under four heads. You may have to pay some other costs depending on when you plan to withdraw your funds or how you channelise your premiums.

List of Charges

• Premium Allocation Charge. It is an upfront cost deducted from the premium as a percentage of it. It is levied for the initial costs, including agent’s commission.
• Fund Management Charge. It is deducted from the fund value for management of funds. The fund value comprises the premium portions that are invested in the fund options chosen by the policyholder and the returns these investments generate from the markets they are deployed in.
• Mortality Charge. Deducted from the fund value, it is the cost of providing insurance coverage.
• Policy Administration Charge. It is levied on the fund value for administration of the insurance policy. It can be a flat charge or vary at a predetermined rate.

Additional Charges

• Surrender Charge. This is paid typically as a percentage of the fund value if a policy is surrendered in its initial years.
• Fund Switching Charge. You can not only allocate your premiums in the various funds offered in Ulips, ranging from pure equity to pure debt funds, but also switch your funds among them. A certain number of switches are usually free in a year. Subsequent switches attract this flat charge, which is deducted from the fund value.
• Miscellaneous charges. A flat charge may be levied in the form of cancellation of units for any changes in the insurance contract, such as alterations in the sum assured or the policy term.