ULIP is a combination of insurance and investment. In ULIP plans, Part of policyholder premium goes to Fund(Equity, debt,balance,etc) and another part goes for risk coverage.
Here is the list of important charges in ULIP
- Policy Administration Charge :
This Charge is levied by an insurance company to a policyholder for handling administrative purpose of a policy. It majorly includes policy servicing i.e opening , modification, closing of policy. This task requires various paperwork, cost etc for insurance company . units get deducted from insured availed units.
- Fund Management Charge :
Insurer take this charge for management of policyholder’s fund. This charge vary from one plan to another.
- Fund Switch Charge :
A process in which a policyholder switches his money from one fund to another fund is called fund switching. A limited number of switch is free, once if switching limit gets cross, this charge comes into picture.
- Discontinuous Charge :
A ULIP policy has lock in period of 5 years. An insured
Policy turns to Discontinuous , when he stops paying premium in initial 5 years . When policy becomes discontinuous, Discontinuous charge is applied on policy and Fund gets moved to Discontinued Policy (DP) fund.
- Mortality Charge :
This charge is taken by an insurer for protecting an insured. Sum at risk is the most important factor while calculating mortality. It means difference between Sum assured and Fund value. This charges differs from age and it’s deducted monthly.
- Premium Allocation Charge :
A percentage of premium gets deducted from premium before allocation of units. For ex. If premium of policy is 50,000 and PAC is 10%, 5000 gets deducted and an insured buy units on remaining Fund. Insurance company takes this charge for handling Medical expenses, underwriting cost, etc.
This article is not sponsored and not meant for endorsing any particular insurance company. Please Check Terms and Condition of respective organization along with inclusion and exclusion before buying insurance policy.