Charges You Must Know Before Investing in ULIPs

Several people prefer ULIP plans over life insurance plans due to their high-interest rates. But even the best investment schemes have extra charges. And similar is the case for any best ULIP plan.

If you wish to invest in ULIP plans, you must know these charges. It will help you realize the total expenses of a ULIP plan, which will be then useful in determining the returns to investment ratio. Below are ten such charges that everyone must know before investing in ULIPs.

Mortality Charges

Mortality charges are for adding a life cover to your ULIP plan. Usually, insurers set aside a portion of the premium for the life cover. If you invest 10,000 in a ULIP, around 1000 will be set aside as the mortality charges. So, when a nominee raises a claim, these morality charges provide the assured life cover even if the invested ULIP has nil or low returns.

All the best ULIP plans have these charges as life cover is the basic feature in a ULIP plan. And they are present in each premium payment.

Fund Management Charges

Most ULIPs invest money into mutual funds, making them the best investment scheme today. But these funds have specific managers, teams and workforce who contribute to the funds’ success. And these fund management charges are for the expenses incurred towards fund management.

All ULIP plans have these charges, which are necessary every time you pay a premium.

Fund Switching Charges

ULIP plans allow the user to choose the preferred funds at the beginning of the policy. They also provide the options to change these funds in the middle of the policy term. Although the first one or two switches are free of cost, the remaining limited number of changes requires charges, known as fund switching charges.

You only have to pay these charges when you need to switch the funds, and that too after a few free switching.

ULIP Surrender Charges

ULIP surrender charges are the charges for surrendering a ULIP plan mid-term. So, you only have to pay these when you wish to surrender and discontinue the policy.

Premium Allocation Charges

Premium allocation charges are one of the initial charges meant for deciding the premium amount. These also include the diversification of premiums into various funds. So, every ULIP will have these one-time charges.

Policy Administration Charges

Policy administration charges are for the paperwork, initial management, and onboarding expenses. These are present in every ULIP plan but only need paying once, in the initial premium payment.

Partial Withdrawal Charges

ULIP is the best investment scheme because it allows partial withdrawal, which is not usually seen in market-dependent investments. This withdrawal comes with a few criteria and costs, known as partial withdrawal charges.

You only have to pay these charges when you need to withdraw funds from the ULIP plan.

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