Charges Under ULIP (Unit Linked Plans)
- Contribution Related Charges : These are the charges that are represented as a percentage of the regular or single contribution paid. In case of a regular contribution plan, it is usually high in the first year to pay for the distribution cost. This charges pays for the issuance and for distribution commissions. This charges are running for the policy.
- Administrative Charges : These are charges that are levied for the administration of the policy and the related cost of administration of the insurance company,itself. They are more related to the cost like IT , operational, etc cost of continuing the policy.
- Fund Management Charges : These are the charges for buying and selling debt and equity. These are the charges are adjusted in NAV it self.
- Mortality Charges : This covers the cost of providing life protection for the insured and may be paid once at the start of the policy for a recurrent manner for example this charges levied to provide the insurance cover under the plan . normally these charges are one year charges as per the age of the holder.
- Rider charges : Rider charges are similar in nature to the mortality charges as they are levied to pay for the other protection benefits that the policy holder has choosen for- like the critical illness benefit or the accident benefit,etc.
- Surrender Charges : When the policy holder decides to surrender the policy or partially withdraw some of the units for cash , a surrender charge may be apply. Surrender charges are used to cover initial expenses that have been incurred by the company but not yet recovered from the policyholder yet.
- Bid offer Charges : In ULIP specifically certain insurers might create a difference in the price at which they sell the unit and the price at which they buy the units. Investor’s contribution are used to buy units in the investment fund at the offer price and are sold when benefits are required at the bid price. The difference between the offer and bid prices Is known as the “bid-offer spread”, this is used to cover expenses when setting up the policy.
- Transactional specific Charges : These charges are levied when the client does some specific transaction like changing funds, topping up the investment component or withdrawals.