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Some ULIP Charges You Must Know About

Updated On Dec 17, 2021

Investors who wish to keep a tight eye on their portfolio and see it increase consistently over time can consider goal-based investments. A growing number of young workers are becoming financially savvy and seeking ways to maximize their monthly savings. Unit Linked Insurance Plans (ULIPs) have been one of the most popular ways to invest for your long-term goals during the last several years. Its appeal stems from the fact that it fulfills the dual objective of making significant returns through market-linked funds while also offering secure security to your loved ones through a life insurance policy. Consider a ULIP as a hybrid product that combines investing and protection benefits in one package. These are similar to mutual funds that have been wrapped in an insurance cover.

ULIPs, like any other financial product, have associated expenses that you should be aware of before investing. Because it is a structured insurance product, it must be held for a lengthy period of time in order to gain significant investment benefits. Furthermore, because the Insurance Regulatory and Development Authority of India (IRDAI) has capped these charges, these ULIP charges have decreased in recent years.

Some ULIP Charges You Must Know About

However, there are some ULIP charges that you should be aware of before choosing to invest in a ULIP. The following fees are listed:

  • Mortality Charge

The fundamental aim of a ULIP is to offer you a life insurance policy in addition to market-linked benefits over the policy's term. The insurance company charges you a tiny mortality charge in order to provide you with this life insurance. The amount owed as a mortality fee is normally determined by a number of factors, including age, health, and the quantity of coverage purchased. These fees are calculated by deducting 1/12th of the yearly mortality charge on a monthly basis. The insurance company's policy may differ.

  • Premium Allocation Charge

This charge is deducted from the investor's premium amount in the form of a tiny percentage of the premium. After these fees are deducted, the remaining premium is invested in the funds selected by the policyholder. The premium allocation charge varies by plan, and it could be as little as 0% or as high as 8%.

  • Policy Administration Charge

This amount is used to recoup the costs of keeping your policy in good working order. This could entail things like policy record-keeping, paperwork, and services. On a monthly basis, the policy administration fee is deducted by redeeming units at the current unit price.

Surrender/Discontinuation Fee: You should be aware that ULIPs have a five-year lock-in period. It's worth noting that, because this is a structured insurance product, you'll need to spend a long time to gain the rewards. You might choose to surrender your policy before the lock-in term finishes if you need to stop paying your premiums due to unforeseen circumstances. A policy cancellation or surrender fee will be charged in this event. The fee would be different depending on which year you decide to stop using the service.

  • Miscellaneous Charge

A plan may allow a certain number of free limits per year before imposing a per-transaction charge.

Before investing in any financial instrument, it is to your best financial advantage to be fully informed about the associated fees. Understanding these fees in detail will help you gain a better understanding of how your money is invested and will enable you to make sound and informed investment decisions. It's critical that you examine your risk tolerance and future financial needs when making an investment decision. ULIPs allow you to earn market-linked returns. Investing in unit-linked plans helps you establish a consistent saving and investing habit, which is critical for building creative wealth over time.


So, if you're satisfied that you understand the costs connected with ULIPs and that it sounds like a good investment to you, there are plenty of possibilities in the market today. In India, ULIPs (Unit Linked Insurance Plans) are one of the most popular and reliable investment options. ULIPs have a number of advantages and give insurance and investment coverage in one package. The customer's premium is split into two halves, one for insurance and the other for investment, with a variety of alternatives available. 

Also read: How To Buy ULIPs Online in 2021?

What Are The Different ULIP Charges That You Must Know About?

 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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