Investing in ULIPS? Are You Aware of These 9 ULIP Charges?

Jul 17, 2018 | 4 months ago | Read Time: 3 minutes | By iKnowledge Team

ULIPs Insurance Plan

Unit Linked Insurance Plans are known to offer dual benefits of insurance with investment. When you invest in ULIP you create a possibility of higher returns with safety protection. That said, before you invest in ULIP here are certain ULIP charges you need to keep in mind which you can pay over the entire tenure to get the most suitable ULIP insurance for yourself.

Premium Allocation Charge

Deducted directly from the premium, Allocation charge is levied in the beginning to recover from the initial expenses of the distributor fee. This fee is charged while issuing the ULIP policy.  The policyholder then uses the investible amount to purchase units of the funds which acts as the balance of the amount. These charges have a set of guidelines and are regulated by the Insurance Regulatory and Development Authority (IRDA).

Policy Administration Charges

If you want to invest in a ULIP insurance, you are required to pay the administration charges which is an amount deducted towards the maintenance of the policy. Maintenance of the policy includes all the paperwork, premium intimation, so on and so forth.  This charge could remain constant throughout the policy or variably rise at a pre-defined rate.

Fund Management Charge

If you are a ULIP insurance policyholder, you are given the option to switch your investment from one fund to another. This process of moving your funds or investments across options is called switching. The switching limit is set each year without any charges but with subsequent switches an amount of Rs. 100 or Rs. 250 is charged per switch.

Mortality Charges

Mortality charges are made when you are provided with the insurance cover. While buying a ULIP insurance the insurance company gauges the insured person’s age, gender and health conditions based on which they assume a certain age till which you are to live. This charge acts as a compensation for the insurance company in case the insured individual passes away before reaching that age. The payment type for this charge is usually on a monthly basis. The amount chargeable to you depends on your age, the cover you have bought and other such details. Since ULIP is an investment and an insurance product, an individual is required to pay these charges.

Surrender/Discontinued Charges

If you indulge in a premature encashment of units either partial or full, the surrender charge is deducted from the total amount. This charge is calculated based on the percentage of the annual premium. The maximum amount charged by insurance companies is defined by the guidelines set by the IRDA.

Premium Redirection Charges

In case you find a fund to be risky and want to redirect your future premiums to a less risky fund, insurance companies then levy the premium redirection charges. This, however, does not change the current fund structure.

Guarantee Charges in ULIP

If an insured individual gets a guaranteed return, the insurance company makes a ULIP charge of the high-NAV guarantee variety. For example, Neha has a ULIP which promises her 120% after 15 years, she is required to pay a guarantee charge for the same.

Rider Charges in ULIP

In case you buy additional benefits to your original plan, these charges are levied on you buy the insurance company. For example, if you take a critical illness rider with Aegon Life’s ULIP plan, along with enjoying its benefits and securing your life, you are required to pay an extra charge for the same.

Miscellaneous Charges in ULIP

This charge type is of a relatively smaller amount. For example, if you want to switch from a premium payment of annually to quarterly, a miscellaneous charge is levied on you by the insurance company.

Now that you are aware of these charges, choose to buy Aegon Life ULIP Plan and enjoy its dual benefit of investment and insurance.

Advt. no.: IA/Jul 2018/4186


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