ULIP fundamentals #2

What is Net Asset Value (NAV) of ULIP?
A NAV is the value of each unit of the fund on a given day. The NAV of each fund is displayed on the website of the respective insurers. As per IRDA rule, Insurers do not have to disclose portfolio details as done by Mutual fund.

Definition of ULIP charges:
The insurers have the right to revise fees and charges over a period of time.
1) Premium Allocation Charge
This is a percentage of the premium appropriated towards charges before allocating the units under the policy.
2) Mortality Charges
These are charges to provide for the cost of insurance coverage under the plan. Mortality charges depend on number of factors such as age, amount of coverage, state of health etc
3) Fund Management Fees
These are fees levied for management of the fund(s) and are deducted before arriving at the Net Asset Value (NAV).
4) Policy/ Administration Charges
These are the fees for administration of the plan and levied by cancellation of units. This could be flat throughout the policy term or vary at a pre-determined rate.
5) Surrender Charges
A surrender charge may be deducted for premature partial or full encashment of units wherever applicable, as mentioned in the policy conditions.
6) Fund Switching Charge
Generally a limited number of fund switches may be allowed each year without charge, with subsequent switches, subject to a charge.
7) Fund redirection charges
Generally a limited number of fund redirects may be allowed each year without charge, with subsequent redirects, subject to a charge. this is to divert your future premiums into different fund.
8) Service Tax Deductions
Before allotment of the units the applicable service tax is deducted from the risk portion of the premium. 

What is a Top up premium?
Yes, one can invest additional contribution over and above the regular premiums as per their choice subject to the feature being available in the product.

What is a SWITCH of fund?
Yes. “SWITCH” option provides for shifting the investments in a policy from one fund to another provided the feature is available in the product. While a specified number of switches are generally effected free of cost, a fee is charged for switches made beyond the specified number.

What is a partial encashment/withdrawal?
Yes, Products may have the “Partial Withdrawal” option which facilitates withdrawal of a portion of the investment in the policy. This is done through cancellation of a part of units.
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