ULIP plans have been prevalent and are now one of the market’s most widely available investment solutions because of the twin advantages of investment and insurance. But in contrast to other investment possibilities, learn more.
Before allocating units, insurance companies subtract preset fees, and the premium balance is invested in various asset types, including stock, debt, etc. Let’s examine the different costs that are levied under the ULIP plan.
Charges for Premium Allocation
The Premium Allocation Charge is the amount the insurance provider deducts from each premium as a percentage (PAC). The insurance company often levies a higher rate of premium allocation charge during the first few years of the ULIP plan. In the ULIP plan, renewal fees, upfront fees, and commission fees are all included in the premium allocation price.
Whether the insurance is a regular or single premium policy, the frequency of premium payments, the premium rate of the procedure, and the method of premium payments all affect the premium allocation charges.
Charges for Mortality
Mortality costs are subtracted to provide insurance protection under the plan. Mortality expenses are removed based on various variables, including age and the coverage amount. These fees are recurring and are taken out of the selected funds monthly.
Charges for Fund Management
Insurance firms charge a fee for managing various funds in ULIPs. Before arriving at a NAV, these fees levied to collect the money are deducted. Daily adjustments are made to the fund management fee based on net asset value. The maximum fund management fee, which is charged daily, is 1.35% of the fund value annually. In an equity fund, the insurer often assesses the highest price; in a non-equity fund, the fee is typically smaller.
Charges for Policy Administration
Each selected fund’s monthly unit cancellation fee calculates the policy administration charges, which are fees imposed to manage the plan. The policy administration fee either stays the same for the duration of the policy or varies at a set rate.
Charges for ULIP
You can refer to the ULIP calculator to understand how all these plans work.
Charge for Partial Withdrawal
The policyholders are entitled to make a partial withdrawal from the ULIP plan after the lock-in period of the plan has ended. Some ULIP plans have no restrictions on partial withdrawals, while others levied Rs. 100 fees if the insured made more than 2-4 withdrawals.
Charge for Switching Funds
In ULIP plans, investors have limited free swaps each year between different fund selections. In addition, depending on the insurance company’s fee schedule, each changeover made by the insured is subject to charges ranging from Rs. 100 to Rs. 500.
Enhanced Redirection Fee
Suppose the insurance company levies premium redirection fees. If the insured transfers future premium payments for the policy to a different, less risky fund option without changing the present fund structure.
The ULIP plan allows riders to expand the policy’s scope of coverage. However, additional rider fees are taken out of the fund option each month to use the rider benefit. For instance, the insured must pay an additional rider fee to receive the help of the critical sickness or accidental demise benefit riders.
ULIP plans provide special top-up features. This enables the investors to add additional funds to the insurance once or more. Anytime during the policy’s tenure, the top-up sum may be paid. By raising their corpus amount, top-up investors can double their money. Insurance firms frequently deduct a predetermined percentage as top-up fees.
Exceptional Discontinuance Fee
The money invested by the insured is trapped in a discontinuation fund if the policyholder decides to stop paying the premium before the lock-in term of 5 years has passed. According to the terms and circumstances of the policy, a premium discontinuance charge is assessed for the termination of the premium. A percentage of the fund value and a portion of the premium amount is applied to the premium discontinuation charge.
Although purchasing ULIP plans provides life insurance and investment rewards, a person must be aware of these ULIP expenses before choosing a plan.
A ULIP plan is the best option for you if you are more concerned with the investment aspect but still worried about your family’s financial security. To make the best choice, consider the ULIP charges listed above before deciding on the plan.
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.