Some common terms used in ULIPS

Premium : The amount you have decided to invest into your policy at the frequency you chose.

Sum Assured : The amount one is insuring their life for.

Death Benefit : The amount paid to the nominee upon death of the insured. (This amount depends on the Sum Assured. Death Benefit and Sum Assured are not the same in some cases).

Term of Policy : The number of years the policy will be active.

Premium Paying Term : The number of years you have commited to paying premiums towards your policy. Term and premium paying term need not be the same. In some cases one might decide to pay premiums for a like 3 or 5 years but the policy will be active for 15 year or more.

Riders : These are additional benefits you can opt for, for a charge. Riders are not free. The charges you pay increase based on the riders you choose.

Fund Management Charge : This is a fee charged for managing your investments. It is usually in the annual interest range of 0.75% to 2.25% depending on the fund you choose to invest in.

Administration Charge : This is the charge for handling paper work and other miscellaneous back office expenses.

Mortality Charge : This is the charge for insuring your life. The charge depends upon the sum assured you have chosen.

Surrender Charge : This is the charge if you wish to surrender and close your policy prior to its maturity.

Premium Allocation Charge : This is the charged deducted from each and every premium paid towards agent commission and other marketing and initial expenses.

Benefit/Policy Illustration : This is an illustration of the plan with numbers. It includes the premiums being paid, all the charges, and the value of your investments based on return of 6% and 10%. Never invest in a ULIP without reviewing the policy illustration.

Investment Funds : You have a choice of multiple funds to choose from to invest in. Each fund has it defined range of equity and debt allocation. These funds you invest in dictate the risk you take and the returns you can expect from your investments.

Never invest in a ULIP without understanding the charges. Always spend time to review the illustration to get a better idea of where your money is going. It will give you a breakup of the premiums you pay, the charges being deducted and amount invested. Per the new IRDA norms, it is mandatory for all insurance agents to show you the policy illustration and get your signature on it.