ULIP - Charges & Benefits

Steps for choosing a ULIP:

Choosing the right ULIP strategy is not that difficult if you have got your basics right. The below mentioned steps will guide you choose the best suited ULIP:

a) You would be aware of the fact that equity, debt and balanced are the 3 basic types of funds that are generally offered by a ULIP. Therefore, to start with, you should be aware of the underlying funds offered by a particular ULIP. If you are ready to take risks, equity funds are preferred; whereas, if you don’t want to take too much risk, debt or balanced funds would be a better option for you.

b) The next step is to look for the applicable charges in a ULIP. There are a number of fees & costs associates with ULIP like:

Fund management Charge: FMC is the fee charged by the insurance company for managing your funds. These charges are deducted before arriving at the NAV and adjusted on a daily basis. The maximum allowed is 1.35% per annum of the fund value.

Switching Charge: ULIPs not only allow you to invest your money in fund options with different debt-equity exposures, but also give you the option to move your money between different funds, this facility is called Switching. For example, you can switch money from a fund invested 100% in equity to a balanced portfolio, which is invested 50% equity and 50% in debt. Only a limited number of fund switches are recommended & free in a year, later on investor is charged on per switches basis.

Premium Allocation Charge: It is discounted as a fixed percentage of the premium received and generally charged at a higher rate in the opening years of a policy. These are the initial expenses incurred by the insurance company at the time of policy insurance. PAC may vary depending upon the premium amount, premium frequency (i.e. monthly, quarterly, and annually) and payment mode.

Policy administration charges: It is the fee levied for the administration of the policy and is charges on monthly basis by cancellation of units from all the funds chosen. It is an amount deducted towards the maintenance of the policy. Maintenance of the policy includes all the paperwork, premium intimation, so on and so forth.

Partial Withdrawal Charges:   ULIPs have the option of partial withdrawals of funds. Some plans offer unlimited withdrawals, but some restrict it to 2-4 withdrawals. These withdrawals can be free for up to a certain limit or you can be charged based on your transactions.

Mortality Charge: Mortality charges are made when you are provided with the insurance cover. These are imposed by the insurer for providing death cover to the insured. Mortality charges are depended on a number of factors such as age, amount of coverage (sum assured) etc. are deducted on monthly basis.

These charges play a crucial role in deciding the final cost associated with a ULIP and the premium amount you’ll be paying.

c) Check if the ULIP chosen by you offers sufficient flexibility to invest in funds of your choice based on your financial goals and funds’ performance. You should always be able to switch between the funds and always check for more number of switching options in the ULIP chosen by you.

d) Decide the objective behind your investment. It will help to set a financial goal before starting investing as per your risk appetite?

e) Ask yourself are you making the investment for the long term or short term?

Benefits of investing in ULIPs:

a) Death benefits: A ULIP offers death benefit to the policyholder in the term of policy. While the death benefits are catered to with the value of the fund, benefits differs based on the cause of demise of the insured.

b) Tax benefits: Premium paid on ULIPs is eligible for a deduction under Section 80C up to a maximum of Rs 1.5 lakhs during a year. The maturity benefits on ULIPS are also tax free. However, the minimum sum assured or the death benefit should be at a minimal of 10 times of the annual premium. If this is not the case, then tax benefits are covered at 10% of the Sum Assured and its maturity benefits are not tax free.

c) Insurance and investment benefits: ULIP offers triple benefits, covering investment, life cover, and tax savings. The investor gets benefit from a comprehensive life cover based on his/her preferences and budget.

d) Long-term investment benefits: A ULIP plan is one of the most suitable investment instruments for those who seek to earn maximum returns on the investments they make in long-term. Market volatility and fluctuations may have an impact on the returns in short-term. Therefore, long-term investments makes it easier for the investors to deal with the market volatility and earn high rate of return.

e) Withdrawal benefits: A ULIP plan is convenient in such situations. A ULIP plan allows it’s investors to withdraw a portion of the investments in case of emergency, after the completion of a pre-determined timeline. Generally, such withdrawals are tax free.

ULIPs in India 2019:


Entry Age

Minimum premium

Premium allocation charge

Policy admin charge

No. of free switches in a year

Aegon life imaximise secure plan

7 to 55 years

Rs. 24000 to 36000


Rs. 100 per  month


Bajaj Allianz Future Gain

1 to 60  years

Rs. 25000

0% to 1.5%

Rs. 33.33 per month


PNB Metlife Smart platinum

7 to 70 years

Rs. 30000 to 60000

1.25% per annum (maximum)

Rs. 40 (max)


MAX Life Fast track growth fund

18 to 50 years

Rs. 25000 to 10000

2%(single premium) to 4 % (Annual premium)

Rs. 1500 per year


SBI life wealth Assure

8 to 65 years

Rs. 50000

3% of single premium

Rs. 45 per month


SBI life -ewealth insurance

18 to 50 years

Rs. 10000 to No limit

No charge



ICICI Pru Wealth Builder II

0to 69 years

Rs. 24000 to 48000

3% to 4%

Rs 500 per month


LIC Market Plus –I Growth fund

18 to 65 years

Rs. 5000 to 30000


Rs 60 per month (max)


Tata AIG Life invest Assure II-Balanced fund

4 to 55 years

Rs. 75000 to 12000

5% of annual premium

0.25% of annual premium


SUD Life dhan suraksha plus

8 to 50 years

Rs. 24000

6% annual premium

Rs. 6000 per annum (max)



To read the first Blog Introduction to ULIPs (Unit Linked Insurance Plans) in this Series. Click here



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