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Monday, August 03, 2009

Know your Mortality charges

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Ulips are in great demand as insurance companies n agencies gives it a much weightage and so clients took it as safe mode for investments. Ulips include the worse of both worlds, it brings with them high cost, involving numerous charges for premium allocation, policy administration, fund management, mortality, rider premium, surrender and service fees. Since an insurer collects premium from policy holder, the sum at risk at the begining of a policy year will be difference between the sum assured and the agregate premium collected before the given policy year or the fund value in the policyholders account, depending on whether it is a traditional plan or a unit-linked. The mortality charge increses with the age of the policy holder asnd depending on the fund value, the deduction on the fund value may rise or fall. After premium allocation and fund management fee, mortality premium is the highest charge that a policy holder pays in ULIP. Thus a higher mortality charge is bound to reduce your investment value as it is appropriated through the cancellation of units of equivalent value.

A policy buyer must know the mortality charges and compare different insurers and plans

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