ULIP Charges

ULIP Charges

The only thing I don’t like about ULIP is that they are associated with several charges and among these several charges many charges are extremely high. Read my Article, ULIP Vs Mutual Funds. I have explained in very detail that why you should not go with ULIPs.

There are total 14 Insurance companies in India and the problem is that, there is not any standardized method in India to charge such kind of expenses. Every company has its own Business model and according to which they charge different kind of charges. So after deducting several charges, the remaining amount goes towards investing in the Capital Markets (Stocks & Bonds). But in case of Mutual Funds, the scenario is different. In case of Mutual Funds, everything you invest (100%) goes towards long term investing.

Expenses Charged in a ULIP -

01) Premium Allocation Charge:
A percentage of the premium is appropriated towards charges initial and renewal expenses apart from commission expenses before allocating the units under the policy.

02) Mortality Charges:
These are charges for the cost of insurance coverage and depend on number of factors such as age, amount of coverage, state of health etc.

03) Fund Management Fees:
Fees levied for management of the fund and is deducted before arriving at the NAV.

 
04) Administration Charges:
This is the charge for administration of the plan and is levied by cancellation of units.

05) Surrender Charges:
Deducted for premature partial or full encashment of units.

06) Fund Switching Charge:
Usually a limited number of fund switches are allowed each year without charge, with subsequent switches, subject to a charge.

07) Service Tax Deductions:
Service tax is deducted from the risk portion of the premium.