ULIP – Understand the jargon before investing

Unit Linked Insur­ance Plan or pop­u­larly known as ULIP is one of the highly invested finan­cial prod­uct by investors. But many of the investors do not under­stand the terms or jar­gon men­tioned in the life insur­ance con­tract. There are many instances where insur­ance agents do not explain the jar­gon to the investors. In some cases, the investor is not inter­ested to under­stand the jar­gon as they are not bothered.

As an investor you should know and under­stand all the jar­gon used by insur­ance com­pa­nies before invest­ing in insur­ance product.

Also read — ULIP – Every investor should know this information

Few jar­gons used by ULIPs are as fol­lows —

Trans­ac­tion Statement

It’s a state­ment issued by the insur­ance com­pany to show the activ­ity of the fund. Nor­mally every insur­ance com­pany issues a monthly trans­ac­tion state­ment and sent it to their clients. Trans­ac­tion State­ment has total fund value of the invest­ment made, num­ber of units avail­able, and value of each unit.

Mor­tal­ity Charge

Mor­tal­ity Charge or life risk charges is the cost incurred by insur­ance com­pa­nies to insure you. Com­pu­ta­tion of mor­tal­ity charge is done based on var­i­ous fac­tors like age, health of the per­son, insur­ance cover etc.

Pol­icy Admin­is­tra­tive Charge

These are cost incurred by insur­ance com­pa­nies to man­age and admin­is­ter the pol­icy. The insurer may charge a flat rate every year or a dif­fer­en­tial rate over the years.

Other Charges

Some of the insur­ers also charge addi­tional cover, rider as requested by the insured. Other charges like fund switch charges which are applic­a­ble if the switch crosses a cer­tain num­ber in a year.

Every investor should be aware of all the charges and expenses before invest­ing in ULIP. It is always advis­able to con­sider these charges as one of the cri­te­ria in select­ing a ULIP plan.

Related posts:

1. ULIP expenses — Do you know?
2. ULIP – Every investor should know this information
3. ULIP poli­cies in India – An Analysis
4. ULIP vs Fixed Deposits – Which to choose?
5. ULIP vs Mutual Fund – Where should I invest?