Gents before you move next please read What is ULIP Almost all insurance companies have in one way or another certain hidden charges. These charges may not necessarily be illegal but the agents of ULIP or any other insurance company will intentionally not divulge to you during his discussion with you of your insurance plan in one way or another. One of the most basic reason why these agents will not tell you upfront about those unnecessary hidden charges is because of the obvious fact that once you, his probable client know these additional charges, chances are you won’t get or buy from him a premium of the said insurance plan. They intentionally hide that list of charges which are obviously to the detriment or disadvantage of the plan holder and the benefit of the insurance company, so as to attract more and more would-be buyers of their plans. The sad thing however, once the plan holders find out this list of not discussed hidden charges, chances are, and these clients will be disappointed and will tell their friends about the company negatively. This event will become indeed a bad advertisement which will make the company be in bad light.
Among the common hidden charges which your insurance company such as the ULIPs may include the following:
1). Surrender Charges: These types of charges are usually reduced or deducted for your premature insurance plan either in partial or full encashment.
2). Fund Switching Charges: This is the kind of charges asked from you once you decide to switch ULIP choices like for instance, from Equity to debt plan. Usually, only limited chances of switches are permitted without any extra charge.
3). Premium Allocation Charge: This is a portion or a percentage of the plan which is reserved towards charges prior to allocating the plan units. This portion or percentage is normally higher in the initial few years varying from one company to the other. For example, if your plan or premium allocation charges is 30%, then out from your total plan or premium paid of Rs. 1,00,000, only a meager Rs. 70,000 is being invested in your funds, the rest goes to charges.
4). Fund Management Charges: These are the usual charges which are taken from your investment in view of managing your funds even before reaching at the so-called Net Asset Value (NAV). The fee for this is usually charged to you as a percentage of funds withinthe scope of management by those fund managers. The said fund ranges from 0.5-2% annually.
5). Policy/Administration Charges: These are usually the charges for taking care of your investment which is sometimes not thoroughly discussed to you by your plan agents to lessen the known charges for greater chances of buying the said plan from the prospected buyers.
6). Maturity Charge: This is the added hidden charge which insurance agencies ask from their plan holders at the end of the plan contract most especially when maturity arrives.
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In conclusion, you should be very keen in scrutinizing your agent in view of the possible charges that you may be paying regarding your insurance plan. You should trust your agent first and foremost in order to get the best of your insurance plan, lest regret in the end. Tell your agent to be very transparent and clear with all possible charges so that in the end both of you will be happy with the said plan.
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