The various costs involved in your ULIP
Our expert highlights the various charges included in a ULIP policy. Understand these charges and their impact, before you opt for a ULIP policy.
November 03, 2011 / 16:42 IST
Our expert highlights the various charges included in a ULIP policy. Understand these charges and their impact, before you opt for a ULIP policy.
I AM 38 years old. I would like to take a ULIP with a life cover/sum assured of Rs 1 crore. Which policy/scheme/insurance company has the lowest premium for a ULIP with Rs 1 crore as sum assured?There is no fixed premium for a given sum assured in a ULIP. Mortality charges get deducted according to the sum assured of your choice. You will also have to pay fund management charge, administrative costs etc. These charges can be as steep as 40-65 per cent of your premium payments in the initial year and it will even out to around 5 to 15 per cent after the first year. This remainder amount will be the investible surplus that is utilised for investment in funds. For instance, say you invest Rs 2 lakh a year in a ULIP for 15 years. At an annual rate of return of 10 per cent, you earn around Rs 54 lakh after 15 years. With zero costs, you would receive Rs 70 lakh. That is, upfront costs were actually to the tune of Rs 16 lakh.Verdict: ULIPs yield good returns if held for a long-term. Ask for the benefit illustration
Each insurance company will have a detailed benefit illustration that shows clearly how the costs are allotted and what is the actual amount invested. The benefit illustrations will help you compare the upfront costs of all the short listed insurance plans and help you arrive at the most attractive low cost option. So, before you choose your ULIP policy, understand the costs and charges involved in a ULIP policy. Tip: Don
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