All You Need to Know about ULIP Charges
There are certain charges and the fees involved in a ULIP, which are levied by the insurer. These charges are mentioned below:
Premium allocation charges:
These are the charges that are levied to recover the expenses incurred by the insurer towards issuing the policy and include the fee for distributorship and the cost of underwriting. These charges are recovered as part of the payable premium. Premium allocation charges are basically a set and pre-fixed percentage of the premium amount appropriated towards the chargeable amount before allocating the units under the policy while the balance amount is invested i.e. used to purchase the units of fund option chosen by the investor. In India, the Insurance Regulatory and Development Authority has mandated the rules and regulations under which the upper-capping on the premium allocation charges is decided and set after the lock-in period of five years.Mortality charges:
When a policy is issued, the insurer provides the cover on the basis of the policyholder’s life expectancy (based on a number of factors like gender, age, health conditions etc.) In case the policyholder does not survive till the expected age, the mortality charges compensate the insurer. These charges are levied on a monthly basis and the exact procedure of calculating these charges in usually a part of the policy document.Fund Management Charges:
These are the charges levied by the insurer for managing the fund options of the policy holder and these charges vary from one fund option to another. As per the set guidelines of IRDA, fund management charges cannot exceed 1.5% of the total fund value. Fund management charges are levied as a set pre-decided percentage of the fund value.Policy Administration Charges:
When you invest in a ULIP, the insurer incurs some expenses towards administration of a policy and these expenses form the policy administration charges. Any expense incurred towards premium intimation, paperwork etc. are covered in these charges. Usually, policy administration charges are levied on a monthly basis and are either fixed or subject to be increased on a pre-decided rate.
HDFC Life offers HDFC Life Click 2 Invest ULIP- a market-linked plan that offers stable returns over a period of time and ensures that there is an optimum and flexible growth of your funds. For details, click on the mentioned link: https://www.hdfclife.com/savings-plans/sanchay-plus .
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