Compare & Buy Car, Bike and Health Insurance Online - InsuranceDekho
Claim, renew, manage & moreLogin

5 ULIP Charges You Must Know About

Published On Oct 14, 2021

A ULIP is a type of life insurance that offers market-linked returns. When you choose a ULIP in India, you establish a strong habit of saving and investing regularly and discipline. This is necessary for long-term financial planning and accomplishing life goals. Because ULIPs are known for their market-linked returns, there are several risks to be aware of when getting ULIP. Based on policyholder behavior, the assurer imposes a range of small fees. If the investor properly structures this investment, the majority of the expenses will be avoided. The Indian insurance regulator, the IRDAI, sets annualized ULIP rates at 2.25 percent for the first ten years of the policy period. We invested in you and helped you make sensible financial decisions.

5 ULIP Charges You Must Know About

Here are 5 ULIP charges you should be aware of:

1. Charge For Premium Allocation

A Premium Allocation Charge is an advance fee deducted from the policyholder's premium. It's calculated as a percentage of what you've previously paid in premiums. These charges cover the company's initial costs of issuing the policy, such as underwriting, medicals, and distribution. The remaining premium is invested in the policyholder's chosen funds after these costs are subtracted.

2. Charges For Mortality

ULIPs are commonly utilized to provide both life insurance and market-linked investments. The life assured's family will be financially compensated by the insurance provider in the event of sudden death. For providing life insurance, the insurance company levies a mortality fee. The amount of a mortality fee is determined by factors such as age, health, and the amount of life insurance coverage received.

On the market, there are a few new-age ULIPs that, upon maturity, reimburse the buyer for the mortality payments deducted throughout the years. This raises the value of the policyholder's corpus upon maturity, making new-generation ULIPs more desirable.

3. Charges For Fund Administration

When policyholders invest in market-linked funds through a ULIP, a fund management specialist controls their money, helping them to earn higher returns. For this service, insurance companies charge a management fee. The assurer can only charge 1.35 percent of the fund's value per year, according to IRDAI. The fund management fee charged by a bond or liquid fund is often low. 

4. Administrative Fees For Policies

These charges are deducted on a monthly basis to cover the costs of maintaining the policy, which includes, among other things, record-keeping, paperwork, and services. By redeeming units at the current unit price, the insurance administration fee is withdrawn from the policyholder's unit account.

5. Charges Of Surrender

ULIPs require a 5-year lock-in period in order for policyholders to reap the benefits of long-term investing. A policy termination charge or surrender charge will be charged if a policyholder decides to cease paying premiums before the lock-in period expires. Surrender fees vary depending on the year the policy was canceled.

You should be aware of the ULIP expenditures linked with this investment in order to get the most out of your ULIP. It will assist you in gaining a better understanding of how your money is invested and making better financial decisions.

According to IRDAI norms, the maximum first-year dis-continuation charge for normal premium insurance is 6,000 rupees. In the second, third, and fourth years, respectively, 5,000, 4,000, and 2,000 are followed by 5,000, 4,000, and 2,000. If the policyholder decides to resign the policy after it has been in effect for five years and five years of premiums have been paid, there are no surrender charges.


Unit Linked Insurance plans are seen to be a great method to profit from market upswings while simultaneously providing life insurance protection. It's a good idea to read over all of the expenses in a unit-linked insurance plan before investing in one. Before allocating the funds to the units in a ULIP, assurers deduct a certain amount for life insurance. The fees can fluctuate based on the insurance company and the type of ULIP.

Also read - Saving With ULIPs During COVID-19 Pandemic: Everthing You Need To Know

Pros And Cons of ULIPs

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

Popularly Opted Term Insurance Sum Assured

People Also Read

Must BuyMust Buy

Why to Buy Life Insurance Policy Online from InsuranceDekho

  • Tax benefit upto 1,50,000*
  • Claim support everyday 10AM-7PM
  • 50 Lacs+ happy customers
Find the right life insurance for you
By clicking, I agree to *terms & conditions  and privacy policy.
Find the right life insurance for you
By clicking, I agree to *terms & conditions  and privacy policy.