There are primarily three kinds of charges in ULIPs
- Charges at the time of Investment – Premium Allocation Charge
- Charges at the time of Fund Growth – Policy Admin Charge, Mortality Charge, Fund Management Charge
- Charges at time of surrender/servicing – Surrender Charge, Switching/Premium Re-direction charge, Partial Withdrawal Charge
Considering all the above charges, Max Life brings you the best ULIP plan to ensure that you pay minimum charges throughout your investment joruney. Reading further you will find that Max Life Online Saving Plans (ULIPs) have kept all the associated charges to a bare minimum as compared to other insurance providers. So, let us understand how Max Life’s Online Saving Plans are the true “Low Charge” ULIPs.
- Premium Allocation Charge
Premium allocation charge is levied to recover the initial expense incurred towards issuing your ULIP policy such as the cost of underwriting or the distributor fee. The balance amount is used to purchase units of the funds chosen by you. Though IRDAI has set guidelines that ensure a cap on these charges from the fifth year onwards, the premium allocation charges in the first few years can vary between different insurance companies. However, Max Life Online Savings Plan has no premium allocation charge. Yes, the premium allocation charges are ‘NIL’.
- Policy Administration Charge
The cost of administrative expenses such as costs towards the paperwork, the premium intimation, and so on are covered under this head. This charge could either be flat throughout the policy term or could increase at a pre-determined rate. However, you do not have to worry about these charges, as Max Life does not levy any for your ULIP plan. Yes, there is absolutely no policy administration charge for Max Life Online Savings Plan.
- Fund Management Charge
This charge is levied as a percentage of the value of assets (for managing the fund). Though it differs from fund to fund, as per the IRDA cap, life insurance companies cannot charge fund management fees more than 1.35% per annum. Although other insurers levy 1.35% fund management charge for equity funds and similarly more than 1.0% of fund management charge for debt funds, Max Life stands true to its name of low charge ULIP, by charging just 1.25% and 0.9% for equity and debt funds respectively.
Therefore, in real terms, as your corpus grows, the actual amount deducted will be much low for Max Life’s ULIP.
- Mortality Charges
When a policy is issued to you, insurers assume that you (insured person) will live to a certain age based on your current age, gender and health conditions. This charge compensates the insurance company in case you don’t live to the assumed age. Simply put, mortality charges are charged towards providing you with the insurance coverage.
The amount paid under this head depends on the sum assured taken, the age of the policyholder and other such details. The minimum mortality charges for Max Life’s ULIP again makes it the best ULIP plan available. For a 30-year-old male, this charge is 0.84 per 1,000 (Rupees) of sum assured. While on the other hand, these charges are above 1.00 per 1000 (Rupees) of sum assured for ULIPs offered by other insurance providers.
- Switching/ Premium Redirection Charge
Let’s consider that you are putting your entire premium in, fund A of the ULIP. So, likewise, all your future premium will be added to that particular fund. However, premium redirection allows you to redirect your premium payments into a different fund option in the future, say, Fund B. While other insurers may charge you premium switching charge based on your requests made (X amount per request or after 4 requests- X amount per request), Max Life allows you to do this for free. There are no premium redirection charges when you invest your hard-earned money in Max Life’s ULIP, again staying true to its name- the best ulip plan available.
- Partial Withdrawal Charges
From third year onwards, you are allowed to partially withdraw from ULIP, subject to pre-specified conditions. However, such withdrawals attract partial withdrawal charges. Again, Max Life strives to save your money as there are no partial withdrawal charges levied here.
A Snapshot of ULIP Charges Levied by Various Insurance Providers:
(Source: Product brochures as available on the insurer’s website)
As mentioned earlier, ULIPs are an excellent vehicle to generate some handsome returns on your investments. Invest in one and you will understand how ULIP returns in 10 years or more can cater to your different financial goals.
However, it’s important to thoroughly understand the charges associated with ULIPs and compare these charges between various insurers before making your investment decision. We have made your job easy by providing the comparison of charges levied by ULIPs offered by different insurers. Hope this helps you make an informed decision. Happy Investing!