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

Published On Dec 02, 2021

ULIP investments rose to prominence at a time when market investments and mutual funds dominated individual portfolios by promising potentially significant profits while also providing the benefit of life protection. Investing in a ULIP allows you to explore capital market assets while also providing the advantage of a life insurance policy. The insurer imposes a variety of modest fees based on policyholder actions. The majority of the charges will not be incurred if the investor arranges this investment effectively. The Indian insurance regulator, IRDAI, has set a cap of 2.25 percent for annualized ULIP charges for the first ten years of the policy term. During the lock-in period, the charges will be evenly allocated. Here's all you need to know about ULIPs and the various charges associated to help you make an informed investment decision.

What Are The Different ULIP Charges That You Must Know About

Below are a few ULIP Charges that you must know about:

  • Premium Redirection Charges In ULIP

If you divert your future premiums to a less hazardous fund option without modifying the present fund structure, assurers incur premium redirection fees.

  • Guarantee Charges In ULIP

On ULIPs with high-NAV guarantees, assurers incur guarantee fees. The assured pay for these in exchange for a guaranteed return. For example, if a ULIP offers a return of 120 percent after ten years, you'll have to pay guarantee fees.

  • Rider Charges In ULIP

These fees are applied to extra benefits purchased in addition to the standard plan. If you choose a critical illness rider, for example, you must pay additional fees.

  • Miscellaneous Charges In ULIP

It is a relatively minor component of the charge structure. You'll have to pay extra fees if you switch from an annual to a quarterly premium payment plan.

  • Partial Withdrawal Charges In ULIP

Investors can withdraw some of their money from ULIPs starting in the third year, subject to certain criteria. Withdrawals of this nature, however, are subject to penalties.

  • Mortality Charges In ULIP

To provide death coverage to the assured, the assurer imposes certain conditions. The assurer determines it by taking into account your age, health risk, and the assurer's mortality table.

  • Switching Charges In ULIP

Every year, every investor is given a certain number of free switches between various fund options. Following that, each switch will incur charges, which might range from Rs 100 to Rs 500 for each switch, depending on the price structure of the assurer.

  • Surrender or Discontinuance Charges In ULIP

When an assurer surrenders ULIPs early, it is subject to these charges. In the event of a policy cancellation, the IRDAI regulations state that an assurer is only entitled to recover the acquisition cost. They are a proportion of the fund's value and premium. Surrender charges in ULIPs will range from Rs 1000 to Rs 3,000 for the first four years, based on the premium paid by the assured. Surrender charges are waived after the sixth year.

  • Fund Management Charges In ULIP

These fees are imposed on you in exchange for the management of your funds. This is calculated before computing the fund's net asset value and is charged by the assurer as a percentage of the fund's value. It should not be more than 1.5 percent, according to IRDAI norms.


Because these charges reduce the investible percentage of the premium paid, insurance businesses have frequently been the target of high fees or costs. For years, the unit-linked insurance plans, or ULIPs, have been at the center of this debate. More importantly, these fees are frequently not disclosed to policyholders clearly and understandably.

Also read: 

How To Choose A Good Money Back Policy?

Money Back Or ULIPs? Which Is Better?

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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