Unit Linked Investment Plans (ULIPs) offer a unique blend of insurance and investment. These plans enable you to grow your wealth while providing an assured amount to secure your loved ones in your absence. However, before you invest in a ULIP, it is necessary to understand the various charges associated with it. Read on to understand one important charge that is a part of your premium, the mortality charge in ULIP.
What is the meaning of mortality charge in ULIP?
As stated above, ULIPs offer dual benefits. Your premium amount is also divided into two parts. One part is invested in the funds of your choice and the other is invested in a term plan to secure your loved ones. The amount that is contributed towards the latter is also known as the mortality charge in a ULIP. In other words, mortality charges are like the premium paid for a term insurance.
How is mortality charge in ULIP calculated?
The amount of mortality charges to be paid primarily depends on factors like your age, gender, sum assured, etc. Like any other term insurance plan, the mortality charges are low if you buy the plan at a young age and increase substantially as you get older. Insurance providers calculate mortality charges by considering the mortality rate and the risk cover.
Here, the risk cover refers to the amount of life cover~ that the insurance company has to pay to the nominee in an unfortunate event with the policyholder. The mortality rate depends on a person’s current age. Since the likelihood of illnesses and poor health rises as one ages, the insurance company considers age as a major determinant while calculating the risk involved in insuring a life.
How to lower your mortality charges in ULIP?
The best way to lower the mortality charge in a ULIP is to invest in the plan at a young age. Moreover, since ULIPs are long-term investments, the sooner you invest in them, the more time you have to benefit from the power of compounding and maximise your returns. This presents a win-win situation for you. Buying a ULIP at a later stage would result in higher mortality charges along with a shorter investment period.
ULIPs can provide multiple advantages under a single policy. This is one of the main reasons for their popularity amongst investors. However, it is important to invest in ULIPs as early as possible to lower the overall costs incurred and reap maximum benefits from the policy. Buying a policy at a young age translates to lower mortality charges for the plan and higher returns from your invested capital.
If you are looking to invest in a ULIP, you can consider the ICICI Pru Lifetime Classic Plan. The plan offers many attractive features, like:
- 4 portfolio strategies1 as per your preferred investment style
- Choice of equity, balance and debt funds
- A life cover~ and the prevailing fund value as a lump sum payout in case of an unfortunate event
- 4 free fund switches in a policy year
- Wealth Boosters3 to increase your overall returns
- A top-up facility to increase your investment
- Flexible premium payment methods like monthly, half-yearly, and yearly options
- Tax benefits2 under Section 80C of the Income Tax Act, 1961
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1 The Policyholder can have funds in only one of the Portfolio Strategies.
2 Tax benefits under the policy are subject to conditions under Sections 80C, 80D, 10(10D), 115BAC and other provisions of the Income Tax Act, 1961. Goods and Services Tax and Cesses, if any, will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for more details.
3 Wealth Boosters equal to 3.25% of the average of the Fund Values including Top-up Fund Value, if any, on the last business day of the last eight policy quarters will be allocated as extra units to your policy at the end of every 5th policy year starting from the end of 10th policy year till the end of your policy term.
~ Life Cover is the benefit payable on death of the life assured during the policy term.
ICICI Pru LifeTime Classic UIN 105L155V07