Top 6 ULIP Charges You Must Know Before Investing in ULIP PLans

Are you planning to invest in ULIP plans or Unit linked Insurance plans? I hope you have read the complete guide to ULIP plan before proceeding here. You will also know whether ulip a good investment option by reading that article. Generally there are various ULIp charges for which investing in ULIP in short term can lead to less return, but in long term one can expect a moderate return of 6% – 7% .

How many types of charges applied on ULIP policy?

In this article, I will share about the key & mandatory charges in any ULIP plan which you have to bear in case you invest in such plan. If you don’t know them, then you will never be able to realize how much actual return ULIP plans will give in long run. In case you surrender ULIP plan in short term then you have to bear a huge loss due to these many ULIP charges. So, better to know them properly first.

Summary of common ULIP charges

Generally there are few common ULIP charges which will be applied on almost any kind of ULIP irrespective of Insurance company. But there are few which might be applicable to specific company ULIP plans only. Here I am sharing few of the common charges of Unit linked insurance policy.

  • Premium Allocation Charge
  • Mortality Charges
  • Administration charges
  • Fund management charges
  • Discontinuance Charges
  • Fund Switch charges

6 ULIP charges you must know before Buying ULIP Plan

ULIP is a special insurance product which is designed such a way that one can take benefit of both life insurance and also return of market. Although you can control your risk profile y choosing various types of predefined funds in ULIP plan. But to manage the whole product there are various charges you have to pay from your premium.

Premium Allocation Charge

This is the charge you have to pay for choosing the way of premium payment. E.g. single premium or regular premium payment option. Mostly you have to pay around 3% – 4% of your premium amount for this charge. In many case if you continue your policy beyond 6+ years, you may get some discount also.

Mortality Charges

Mortality Charges are common charge to calculate how much life cover can provided to you for the premium amount paid. This charge will depend up insurer age and the amount of life cover.

Administration charges

This is the administrative charges for maintaining your funds that will be calculated every month and deducted form your premium amount. Generally for single premium policies, this charge is low when it is comparatively high for regular payment ULIPs. These charges are applicable in first 5 year duration.

Fund management charges

Fund management charges will be applicable and will be adjusted from the NAV on a daily basis.

Discontinuance Charges

In case you want to surrender or don’t want to continue your ULIP before completion of 5 years, your ULIP will be charged a Discontinuance Charges which will be determined based on many conditions.

Fund Switch charges

In case if ULIP, you can switch your funds as per market condition or according to your investment need & goal time to time to maximize return and stay invested for long term. In such a case there will be a fund switching charges applicable sometimes. In most cases, you may find ULIPs with free fund switching charges these days.

Example of ICICI Pru Smart Life ULIP Charges

I am just taking an example of ICICI Prudential Smart life ulip plan where one of the premium allocation charges icici prudential is as follows:

One Pay – 3% A discount of 0.5% in the premium allocation charge is given to customers who buy directly from the Company’s website.

Regular Pay:

Premium payment mode/ Annual Premium Year 1 Year 2 Year 3 Year 4 to 5 Year 6 Onward
Annual 6% 5% 4% 4% 2%
Half-yearly / Monthly 4% 4% 3.50% 3% 2%

A discount of 1% in the premium allocation charge in Year 1 is given to customers who buy directly from the Company’s website. All Top-up premiums are subject to an allocation charge of 2%.

Mortality charges in icici prudential is also depending upon the policy term. You can easily find these information on the policy brochure. Make sure you are going through the complete details and understand the charges that you have to bear by investing in any ULIP plan.

How Much Return One can Expect After These ULIP Charges?

Well, the management of funds are quite costly and obviously you have to bear the same from your ULIP premiums. After deducting the various charges, your money will be invested in various funds under the ULIP plan. But, these charges are very high during the initial 5 years of policy, so surrendering ULIP plans before 5 years is not a profitable deal. One can get good return in long term investment. Now, you should think twice before surrendering ULIP before 5 years in case you have invested already. If not and planning to enter into ULIP, then make sure that you will keep invested for long term to reduce the effect of these ULIP charges in long run.


I am a passionate blogger and personal finance enthusiast. Mostly share about investment tips, insurance guide, banking how to guides and various personal finance hacks through my blog. Checkout my first YouTube Channel on Personal Finance Guide.

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