A ULIP has two dimensions; on the one hand, it is a life insurance scheme, and on the other, it offers wealth building. The latter is based on the mutual fund units the issuer buys based on the premium you pay. However, investing in a unit-linked insurance plan does involve certain charges and fees, which vary across insurers. Here are 5 primary fees you need to be aware of:
Fund management charge
As per IRDAI norms, you can expect your issuer to deduct up to 1.35% on your investment every year for managing your money and investing it in different funds.
Premium allocation charge
The insurance company deducts a fixed percentage of the premium you pay to cover the initial expenses, renewal costs, and commission to the agent. After this deduction, the remaining amount is used to buy units.
Usually, only limited number of free switches of your fund allocation are allowed. However, once exhausted, you will need to pay Rs.100 to Rs.250 per switch.
Based on factors like the sum insured, your age, etc., a specific monthly charge is deducted every month to provide you the insurance cover.
Partial withdrawal charge
After you stay invested for 5 years, you are free to carry out a partial withdrawal from your ULIP. However, based on the insurer, you will be granted only 2 to 4 free partial withdrawals. Beyond this, you will have to pay a charge.
Apart from these primary charges, you will have to pay premium discontinuance charge in case you stop paying the premium midway or incur policy administration charge, among others.