Unit Linked Insurance Plans (ULIPs) are unique financial products offering the dual benefits of insurance and investment. A crucial aspect of any ULIP is the mortality charge, which is the cost of the life cover provided. This article explains how mortality charges are calculated in ULIPs and why they are important.
Understanding Mortality Charges
They are the fees deducted by the insurance company to provide life cover to the policyholder. These charges vary based on several factors and are a critical component in determining the overall cost and value of a ULIP policy.
Factors Affecting Mortality Charges
Age of the Policyholder
Younger policyholders typically pay lower mortality charges as they are considered lower risk.
Sum Assured
The higher the sum assured, the higher the mortality charge.
Gender
Statistically, women tend to have lower mortality rates, leading to lower charges compared to men.
Health Condition
A policyholder in good health will have lower charges, while those with pre-existing conditions may face higher costs.
Lifestyle Choices
Smoking, drinking, and other lifestyle choices can increase mortality charges due to higher associated risks.
Calculation of Mortality Charges
The calculation of mortality charges in a ULIP involves several steps:
Determine the Sum at Risk: This is the difference between the sum assured and the fund value of the ULIP plan.
Apply the Mortality Rate: Insurance companies use mortality tables to determine the rate based on the policyholder's age and other factors.
Mortality Charge: To calculate mortality charge, you can apply the following formula -
Mortality Charge = Sum at Risk x Rate of Mortality
Importance of Mortality Charges in ULIPs
Understanding mortality charges helps policyholders manage the overall costs of their ULIP.
Knowing how these charges are calculated ensures transparency and helps in making informed decisions.
Different types of ULIP plans may offer varying mortality charges, allowing policyholders to choose one that suits their needs and budget.
Mortality charges are a fundamental aspect of any ULIP, directly affecting the cost and benefits of the policy. By understanding how these charges are calculated, policyholders can make more informed decisions, ensuring they maximise their ULIP benefits. The various types of ULIP plans may offer different mortality charge structures, so it's essential to consider this factor when selecting a ULIP policy.
Disclaimers:
Unit Linked Insurance Products are different from the traditional insurance products and are subject to risk factors. The Premium paid in unit-linked life insurance policies are subject to investment risks associated with capital markets and NAVs of the units may go up or down, based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. IndiaFirst Life Insurance Company Limited is only name of the Insurance Company and does not in any way indicate the quality of the contract, its future prospects, or returns. Please know the associated risks and the applicable charges from your Insurance Agent or the Intermediary or policy document issued by the Insurance Company. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns. For more details on risk factors and terms and conditions, please read the sales brochure carefully before concluding the sale.
IndiaFirst Life Insurance Company Limited, IRDAI Regn No.143, CIN: U66010MH2008PLC183679, Address: 12th & 13th floor, North [C] Wing, Tower 4, Nesco IT Park, Nesco Center, Western Express Highway, Goregaon (East), Mumbai – 400 063. Toll free No – 1800 209 8700. Email Id:customer.first@indiafirstlife.com, Website :www.indiafirstlife.com, Fax No. +91226570600. Trade logo displayed above belongs to our promoter M/s Bank of Baroda and is used by IndiaFirst Life Insurance Co. Ltd. under license.
Customers 
Distributor 
Employee 
