When you purchase an insurance policy, are
you aware of the various charges? If not, then read on to ensure you buy the
right plan with your eyes wide open …
Irrespective of the type of insurance that
you purchase, although the premium that you pay appears to be a single amount,
it is a combination of different charges. While some are levied across all
policy types, some are applicable to market linked policies, where fund
management is involved. Still other charges are levied when you opt for
additional services within a given basic policy…. Here’s a quick look at the
various charges involved -
Mortality charge: The
insurance company uses part of the premium that you pay to provide for
the sum assured. This could be in the form of death or maturity benefit, as the
case may be. Factors that have any impact on this charge include your age,
desired sum assured, health, occupation, lifestyle, etc.
Fund management charge: This
charge is applicable when a part of the premium amount is invested in
different types of capital market funds, as is the case with Ulip plans.
Policy administration charge: An
insurance company’s administrative expenses - such as documentation,
etc. - are met through this charge. This charge may either be a fixed amount or
a certain percentage of the premium amount or sum assured. However, it is over
and above the basic policy premium. In case of ULIPs, it is collected by cancelling
certain allocated units per month.
Rider premium charge: Riders
are optional benefits that you can add to your existing policy to enjoy
a higher coverage. For these additional benefits, you are charged an amount
over and above the basic policy premium.
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