A ULIP comprises of various charges which one should be well aware of before purchasing a policy. Let us understand some of these charges:

• Premium allocation charge- this is a percentage of the premium appropriated towards charges prior to selecting and allocating units. This charge takes care of initial and renewal expenses.
• Policy administration charge- this charge takes care of the administrative and maintenance expenses of the policy. This charge pays for expenses such as paperwork, intimations, etc.
• Mortality charges- this charge is the actual premium for the insurance part of the policy. The rest of the amount of premium is for used for investment. Mortality charge depends on various factors such as age, gender, medical history, etc.
• Fund management fees- this fee is charged to manage the funds and is a deducted prior to arriving at the nav, net asset value. This fee is a usually a percentage of the value of assets or the accumulated amount and not based on the premium paid.
• Surrender charges- this fee is charged on discontinuation of policy or premature encashment of full or partial amount. The surrender charge is a percentage of the fund value or the annualized premiums.