What are the Charges, Fees and Deductions in a ULIP?

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    LIP stands for Unit Linked Insurance Plan (ULIP), which is an investment product that generates returns from the capital market and at the same time provides insurance cover.

    ULIPs are offered by different insurers and they differ in charges and structure. However, it may be noted that insurers have the right to revise fees and charges over a period of time.

    What are the Charges, Fees and Deductions in a ULIP

    Here are few charges, fees and deduction applicabl on ULIPs

    Premium Allocation Charge

    This is a percentage of the premium appropriated towards charges before allocating the units under the policy. This charge normally includes initial and renewal expenses apart from commission expenses.

    Mortality Charges

    These are charges to provide for the cost of insurance coverage under the plan. Mortality charges depend on number of factors such as age, amount of coverage, state of health etc

    Fund Management Fees

    These are fees levied for management of the fund(s) and are deducted before arriving at the Net Asset
    Value (NAV)

    Policy/ Administration Charges 

    These are the fees for administration of the plan and levied by cancellation of units. This could be flat throughout the policy term or vary at a pre-determined rate.

    Surrender Charges 

    A surrender charge may be deducted for premature partial or full encashment of units wherever applicable, as mentioned in the policy conditions.

    Fund Switching Charge 

    Generally a limited number of fund switches may be allowed each year without charge, with subsequent switches, subject to a charge.
    Service Tax Deductions

    Before allotment of the units the applicable service tax is deducted from the risk portion of the premium.

    Source: IRDA

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