What are the charges in a life insurance policy?

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What are the charges in a life insurance policy?
There are various charges that are applicable in a life insurance policy, which are charged from time to time. Many insurance policy holders may not be aware of these. Here are some of the charges that are applicable.

Premium allocation charge

A premium allocation charge is levied by insurance companies from the annual premium, before investing it in the fund. These charges could be for commission paid to the insurance agent or various other charges. So every time you pay a premium, the amount that is invested could be lesser than the amount of premium you pay.

Policy administration charge

A policy administration charge is levied to recover the administration costs of a policy. Say for example, the policy administration charge stands at 0.7 per cent of the annual premium per month. Thus, if you are paying a premium of Rs 40,000 every year year, the policy administration works out to Rs 280 per year.

Switching charge

If you switch your policy each time, there is a switching policy charge. Some insurance companies allow free switches up to a certain number of times, after which a switching charge is applicable.

Partial withdrawal charges

If a customer partially withdraws some of the amount from the policy fund value, it is known as ‘partial withdrawal.'Some companies charge a partial withdrawal charge of Rs 100, which is collected from the fund withdrawn.

Fund management charge

As the name suggests, a fund management charge is a charge levied for managing the fund. It essentially compensates the fund manager for his time and effort.

Mortality charge

When you buy a life insurance policy, the insurer levies a charge for the insurance protection upon death and to cover certain other expenses. This is known as mortality charge.

Do compare the various charges from different insurance companies before investing.


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