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5 ULIP Charges You Should Know About

Published On Sep 17, 2021

A ULIP is a life insurance policy that provides life insurance with market-linked returns. You build a solid habit of saving and investing in a regular and disciplined manner when you choose a ULIP in India. This is essential for long-term investment planning and achieving life objectives. Because the main characteristic of ULIP is market-linked returns, there are some dangers involved, which an investor should be aware of before purchasing ULIP insurance. The assurer imposes a variety of modest charges based on the behaviors of policyholders. The majority of the fees will not be incurred if the investor arranges this investment well. For the first ten years of the policy term, the IRDAI, India's insurance regulator, caps annualized ULIP premiums at 2.25 percent. g invested and assisted you in making sound and well-informed financial decisions.

5 ULIP Charges You Should Know About

Below are 5 ULIP Charges You Should Know About:

1. Charge For Premium Allocation

A Premium Allocation Charge is a fee collected from the policyholder's premium upfront. It's computed as a proportion of the premium you've already paid. These fees cover the company's initial costs associated with issuing the policy, including underwriting, medicals, and distribution fees. After these fees are deducted, the remaining premium is invested in the policyholder's chosen funds.

Must Read: Are ULIPs As Good As Mutual Funds?

2. Mortality Charge

ULIPs are typically used to provide life insurance, in addition to investing in market-linked products. In the event of sudden death, the insurance company will compensate the life assured's family financially. The insurance firm charges a mortality charge for providing this life insurance. The amount payable as a mortality fee varies depending on characteristics such as age, health, and the amount of coverage obtained under the life insurance plan.

There are a few new-age ULIPs on the market today that return the mortality charges deducted over the years to the consumer upon maturity. This not only makes new-generation ULIPs more cost-effective but also increases the value of the policyholder's corpus upon maturity, making them more valuable.

3. Fund Management Charge

A fund management specialist oversees policyholders' money when they invest in market-linked funds through a ULIP, allowing them to earn better returns. Insurance firms impose a fund management fee for this service. According to IRDAI, the assurer can charge a maximum of 1.35 percent of the fund's value per year. A bond or liquid fund's fund management fee is usually on the lower side.

4. Policy Administration Charges

These fees are deducted on a monthly basis to cover the costs of maintaining the policy, which include record-keeping, paperwork, and services, among other things. The policy administration charge is deducted from the policyholder's unit account by redeeming units at the current unit price.

5. Surrender Charge

A 5-year lock-in period is required for ULIPs, allowing policyholders to benefit from the long-term investment benefits. However, if a policyholder decides to stop paying premiums before the lock-in term ends, a policy discontinuation charge or surrender charge will be assessed. The surrender charges differ according to the year the insurance was surrendered.

In order to get the most out of your ULIP insurance, you should be aware of the ULIP expenses associated with this investment. It will help you have a better knowledge of how your money is invested and make more informed financial decisions.

For normal premium policies, the maximum dis-continuation charge for the first year is 6,000 rupees, according to IRDAI guidelines. 5,000, 4,000, and 2,000 are followed by 5,000, 4,000, and 2,000 in the second, third, and fourth years, respectively. There are no surrender charges if the policyholder wishes to surrender the policy after it has been in force for five years and has paid at least five-yearly premiums.


Insurance firms have frequently been the target of high fees or costs, which reduce the amount of money that can be invested from the premium paid. For years, this battle raged in the case of unit-linked insurance plans, or ULIPs. More critically, these fees are frequently not disclosed to policyholders.

Also Read: Looking For Investment Option? Here Are Some Reasons Why You Should Consider 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.

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