Everything You Need To Know About ULIP Charges

 Everything You Need To Know About ULIP Charges

Because of the combined advantages of investment and insurance, ULIP plans have become extremely popular. They are among the most widely available investment options on the market. They also help make several ULIP tax benefits available. However, ULIP plans offered by various insurance firms have a varied pricing structure compared to other investing options.

Before allocating units, insurance companies subtract preset fees, and the premium balance is invested in various asset types, including stock, debt, etc. Let’s examine the different costs that are levied under the ULIP plan.

* There are two tax regimes in India – new and old. Choose the correct one after consulting an expert to get the desired tax benefit. You can opt for a regime change during the next financial year.

ULIP Charges

The premium allocation fee is the amount the insurance provider deducts from each premium as a percentage (PAC). The insurance company often levies a higher rate of premium allocation charge during the first few years of the ULIP plan.

  • Mortality charges

Mortality expenses are subtracted to provide insurance coverage under the plan. Mortality expenses are deducted based on several variables, including age and coverage amount. These fees are applicable every month and are routinely taken out of the selected funds.

  • Fund management charges

Insurance firms charge a fee for managing various funds in ULIPs. Before arriving at a NAV, these fees levied to collect the money are deducted. Daily adjustments are made to the fund management fee based on net asset value. The maximum fund management fee, which is charged daily, is 1.35% of the fund value annually. In an equity fund, the insurer often assesses the highest price; in a non-equity fund, the price is typically smaller.

  • Policy administration charges

The monthly unit cancellation fee from each of the selected funds is used to calculate the policy administration charges, which are fees imposed for the management of the plan. The policy administration fee either stays the same for the duration of the policy or varies at a set rate. The ULIP calculator is a simple tool that you can use to predict the return you might get at maturity by entering a few details.

  • ULIP Charges

ULIP Charges
Types of ChargesHow is it ChargedFrequency of Deduction
Premium Discontinuance ChargeFlat feeTransaction wise
Policy Administration ChargeFixed % of fund valueMonthly basis
Fund Management ChargesOn fund option (Before declaring NAV)Daily Basis
Fund Switching ChargeFlat feeTransaction wise
Mortality ChargesSum Assured, Depends on ageMonthly basis
Premium Redirection ChargeFlat feeTransaction wise
Premium Allocation ChargeFixed Premium PercentageAs and When the premium is Paid
Partial Withdrawal ChargeFlat feeTransaction wise
  • Partial withdrawal charges

The policyholders are entitled to make a partial withdrawal from the ULIP plan after the lock-in period of the plan has ended. Some ULIP plans have no restrictions on partial withdrawals, while others levied Rs. 100 fees if the insured made more than 2-4 withdrawals.

  • Fund switching charge

In ULIP plans, investors have limited free swaps yearly between different fund selections. In addition, depending on the insurance company’s fee schedule, each changeover made by the insured is subject to charges ranging from Rs. 100 to Rs. 500. These also offer several ULIP tax benefits.

  • Premium redirection charge

If the insurance company levies premium redirection fees, the insured transfers future premium payments for the policy to a different, less risky fund option without changing the present fund structure.

  • Rider charge:

The ULIP plan allows riders to expand the policy’s scope of coverage. For instance, the insured must pay an additional rider fee to receive the benefits of the critical sickness or accidental death benefit riders. Nevertheless, additional rider fees are taken out of the fund option each month to use the rider benefit. Nevertheless, additional rider fees are taken out of the fund option each month to use the rider’s help.

  • Top-up charge

ULIP plans also provide special top-up features. This enables the investors to add funds to the insurance once or more. Anytime during the policy’s tenure, the top-up sum may be paid.

  • Premium discontinuance fee

The money invested by the insured is trapped in a discontinuation fund if the policyholder decides to stop paying the premium before the lock-in term of 5 years has passed. According to the terms and circumstances of the policy, a premium discontinuance charge is assessed for the termination of the premium. You can use a ULIP calculator to estimate future returns and the value of a ULIP investment.

A ULIP plan is best if you are more concerned with investment but still worry about your family’s financial security. To make the best choice, consider the ULIP charges listed above before deciding on the plan.

Dennis Bailey


Professional beer geek. Alcohol ninja. Social media scholar. Award-winning twitter fanatic. Writer. Basketball fan, mother of 2, audiophile, Saul Bass fan and communicator, collector, connector, creator. Producing at the sweet spot between simplicity and purpose to create strong, lasting and remarkable design. I'm a designer and this is my work.