What are Unit Linked Insurance Plans (ULIPs) and the charges applicable to them?

ULIPs: An introduction

ULIPs are insurance policies that offer the opportunity of wealth creation, while providing the security of a Life Cover. With ULIPs, a part of your investment is dedicated towards your Life Cover and the rest is assigned to a fund* which invests in equity, debt, or a combination of both. The returns depend on the performance of the fund opted by you.

ULIPs offer you the flexibility to choose your premium payment term, Sum Assured## and choice of funds to invest in. In addition, the premium break-up and charges under your policy are clearly mentioned in the policy documents and product brochure for greater transparency.

*Here, a fund is a collection of the money you paid as premiums and is managed by the insurance company to provide you better returns
##The Sum Assured is a fixed minimum amount that your nominee receives in your absence

What are the different types of charges in ULIPs?

It is important that you understand the premium break-up under your Unit Linked Insurance Policy. Once you decide the amount of premium to be paid and the Life Cover you want, the insurance company deducts a portion of the ULIP premium. This portion is called the Premium Allocation Charge, and varies from product to product.

The rest of the premium amount is invested in a fund or a mixture of funds of your choice. On this amount, Mortality Charges* and ULIP Administration Charges are then deducted periodically by the cancellation of units. Also, the value of ULIP Fund Management Charges# is reduced from NAV** on a daily basis.

As mentioned above, the fund selected by you invests in either equity, debt or a combination of the two. Hence, the Fund Value## is the overall performance of the fund you have invested in. At maturity, you will receive an amount equal to your fund value at the end of your policy term.

*The cost of providing a Life Cover under the policy is called Mortality Charge
**Net Asset Value (NAV) is the price at which the units of a fund (equity or debt) are purchased.
#
Fund Management Charge is the fee charged by the insurance company, for managing your fund and providing better returns.

##Fund Value is the money that is invested in the equity and debt fund of your choice.

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Unlike traditional products, Unit Linked insurance products are subject to market risk, which affect the Net Asset Values. The customer shall be responsible for his/her decision. The names of the company, product names or fund options do not indicate their quality or future guidance on returns. Funds do not offer guaranteed or assured returns.
COMP/DOC/Sep/2020/99/4437

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