ULIP Charges Explained: Complete Guide
Understanding all the fees and charges in Unit Linked Insurance Plans to make informed investment decisions.
For example, if the fund returns 12% before charges, your actual return might be 9-10.5% after all deductions. This is why long-term investing (10+ years) is recommended for ULIPs - charges as a percentage decrease over time as your corpus grows.
All ULIP Charges Breakdown
This charge covers initial costs like commission to agents, medical examination, etc. Most modern ULIPs charge 0-3% in the first 5 years and 0% thereafter.
Impact
Directly reduces the amount invested in funds
Example
If you invest ₹10,000 with 3% PAC, only ₹9,700 gets invested.
Charged for managing your investment portfolio. IRDAI caps this at 1.35% p.a. of fund value. It's deducted daily by adjusting NAV.
Impact
Reduces your overall returns every year
Example
On a ₹10 lakh corpus, 1.35% FMC = ₹13,500/year
Fixed monthly charge for administrative expenses like record keeping, sending statements, customer service, etc.
Impact
Fixed cost regardless of investment size
Example
₹500/month = ₹6,000/year deducted from your fund
Charged for providing life cover. Increases with age and depends on sum assured. Deducted monthly by canceling units.
Impact
Higher for older policyholders and higher sum assured
Example
A 30-year-old may pay ₹2-3 per ₹1,000 sum assured per year
If you stop paying premiums before 5 years, this charge applies. The fund moves to a discontinued policy fund earning ~4% until lock-in ends.
Impact
Significant loss if you exit early
Example
Year 1-2: up to 6%, Year 3: 4%, Year 4: 2%, Year 5+: 0%
Most insurers offer 4-12 free switches per year. Additional switches may cost ₹100-500 each.
Impact
Minimal if within free limit
Example
First 4 switches free, then ₹250 per switch
See the Impact of ULIP Charges
Toggle "Include ULIP Charges" in our calculator to see how fees affect your returns.
Your investment will grow for 5 additional years without new contributions.
Deduct typical ULIP fees from calculation
Total Invested
₹12,00,000
Maturity Value
₹72,16,099
Wealth Gained
+₹60,16,099
(+501%)Investing ₹10,000/month for 10 years, then staying invested for 5 more years
Growth Projection
Tips to Minimize ULIP Charges
Choose Low-Cost ULIPs
Compare premium allocation charges across insurers. Online ULIPs typically have lower charges than agent-sold policies.
Invest for Long Term
Front-loaded charges reduce as a percentage over time. A 15-20 year horizon dilutes the impact of initial charges significantly.
Opt for Higher Sum Assured
Higher sum assured means lower premium as percentage of SA, ensuring tax-free maturity under Section 10(10D).
Use Free Fund Switches Wisely
Take advantage of free switches to rebalance your portfolio based on market conditions without incurring additional charges.