What are the different kinds of charges in a ULIP?
Unlike conventional traditional products charges are segregated in ULIP & thus made known to the customer.

You can know the charges applicable on your ULIP through:

• Sales benefit illustration: A sales benefit illustration illustrates various charges, year by year, for the term of the plan so that you know exactly how much money is deducted as charges & what is invested.


• Brochure: A brochures informs you about the various charges & their purpose applicable on your policy.


• Advisor: You should enquire your advisor about all the charge applicable on your policy.

Although ULIPs offered by different insurers have varying charge structures broadly, important charges that you should know are:

• Policy administration charges:
  These charges are deducted on a monthly basis to recover the expenses incurred by the insurer on servicing and maintaining the life insurance policy like paperwork , work force etc.


• Premium allocation charges:
  These charges are deducted upfront from the premium paid by the client. These charges account for the initial expenses incurred by the company in issuing the policy- eg. Cost of underwriting, medicals & expenses related to distributor fees. After these charges are deducted the money gets invested in the chosen fund.


• Mortality charges:
  Mortality expenses are charged by life insurance companies for providing a life cover to the individual. The expenses vary with the age and either the sum assured or the sum-at-risk which is the difference between sum assured and fund value of the insurance policy of an individual. Mortality charges are deducted on a monthly basis.


• Fund management charges:
  A portion of the ULIP premium, depending on the fund chosen, is invested either in equities, bonds, g-secs or money market instruments. Sometimes it is a combination of these. Managing these investments incurs a fund management charge (FMC). The FMC varies from fund to fund even within the same insurance company depending on the underlying assets in the fund. Usually a fund with higher equity component will have a higher FMC.

The important thing to note about ULIPs is that the overall charge structure for the plan comes down substantially over a long term. However it may be noted that insurers have the right to revise fees and charges over a period of time.The above can be very simply broken down into:

What a ULIP is:

A plan which gives complete clarity about the various charges deducted and why it's being deducted and so how your fund will grow over time.

What a ULIP is not:

A plan in which you don't know where your money is going or what is happening to it.

Other ULIP Charges:

ULIPs can easily be customized to suit one's needs & requirements. This is primarily due to range of features that ULIPS offer to the customer. Below mentioned are few charges applicable in case you have opted for an additional feature.

ULIP BENEFITS	APPLICABLE CHARGES
RIDERS: Riders are additional or supplementary benefits that are bought along with a main life insurance plan. Some of the commonly offered riders are critical illness benefit rider, accident & disability benefit rider, waiver of premium rider etc. For ex. In case you opt for a Critical illness rider you get additional protection from 9 critical illnesses.	Insurance companies levy rider charges in case you opt for riders.
SWITCH: ULIPs not only allow you to invest your money in fund options with various debt – equity exposure but also give you the option to switch between different funds. For example, you can switch money from a fund with 100% equity to a balanced portfolio, which has 60 per cent equity and 40 per cent debt.	Your insurance company may charge you a fee for switching your funds Generally only a limited number of fund switches are recommended in a year as a ULIP is a long-term investment tool therefore most of the companies allow a certain number of switches each year free of charge, with subsequent switches, subject to a minimal charge.
TOP UP: One of the unique feature offered by ULIP is Top Up where you can make additional contribution over & above the regular premium.	Insurance companies deduct a certain percentage from the top-up amount as charges. These charges are usually lower than the regular charges that are deducted from the annual premium.
SURRENDER: You may decide to surrender (premature partial or full encashment of units) your policy before the term of the plan.	Surrender charge may be deducted for premature partial or full encashment of units wherever applicable, as mentioned in the policy conditions. These charges are levied as a percentage of the fund value or as a percentage of the premium.