A Unit-Linked Insurance Plan (ULIP) combines life insurance with market-linked investments. While a part of your premium is invested in the funds you choose, another portion is used to cover various policy charges, including mortality charges.
Understanding mortality charges in ULIP is important because they represent the cost of providing life insurance cover under the policy. These charges are deducted periodically from the fund value and vary depending on factors such as the insured's age, the sum at risk and the policy terms.
Key Takeaways
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The mortality charge in a ULIP is the premium deducted from your fund value to pay for your life insurance cover. The amount of mortality charges depends on factors such as the insured's age, the sum at risk and the policy terms. To understand how these charges work in practice, consider the following example.
Radha, a thirty-seven-year-old marketing consultant, decides to buy a 10-year ULIP. The premium paid was 10,000 per month, and the ULIP returns capped at ₹12,00,000, which is ten times her premium. .
In case of Radha’s death during the policy term, the amount paid to the nominee is much higher than the amount paid for fund value. For instance, if the fund value is around ₹5 lakhs, the nominee will get ₹12 lakhs.
This is how mortality charges work in ULIPs; they double as life coverage.
India's life insurance industry recorded ₹3.97 lakh crore in new business premiums in FY2024-25
Source: ET BSFI
The ULIP mortality charge calculator uses the customer's mortality rate to determine the mortality charges in ULIPs. The key takeaway here is that the younger the client, the lower the mortality rate, provided that the individual has no lifestyle diseases.
The ULIP mortality charge calculator follows a stringent formula. The charge is generally calculated per ₹1,000 of the sum at risk, depending on the type of ULIP, location, and the policyholder's financial conditions.
As of now, the mortality rate is sourced from the revised Indian Assured Life Mortality Table 2012-14, published by the Institute of Actuaries of India. The mortality charges are calculated in accordance with the prescribed data recommended by IRDAI, according to this formula:
Mortality charge = [Mortality rate (for attained age) * Sum at Risk/1000] * 1/12
Mortality charges in ULIPs are not the same for every policyholder. They are calculated based on several personal and policy-related factors that help insurers assess the level of life cover risk. Understanding these factors can help you estimate the charges associated with your ULIP and make a more informed investment decision.
Understanding mortality charges in ULIP is important because they represent the cost of the life insurance cover provided under the policy. These charges are generally influenced by factors such as the insured's age, the sum at risk and the policy terms. By understanding how mortality charges are calculated and deducted, you can make more informed decisions while comparing ULIPs and choose a plan that aligns with your financial goals and insurance needs.
A ULIP generally includes five key charges: premium allocation charges, fund management charges, mortality charges, policy administration charges and discontinuance charges. The applicable charges vary depending on the policy terms and conditions.
ULIP mortality charges are generally calculated using the insurer's mortality rate and the sum at risk. A commonly used formula is:
Mortality Charge = [Mortality Rate × Sum at Risk ÷ 1,000] × 1/12
The applicable mortality rate depends on factors such as age, gender, health and the policy terms.
Mortality charges themselves do not qualify for a separate tax deduction. However, premiums paid towards an eligible ULIP may qualify for tax benefits under the applicable provisions of the Income Tax Act, subject to the prevailing tax laws and eligibility conditions.
Mortality charges are periodically deducted from the ULIP fund value in accordance with the policy terms. The remaining premium continues to be invested in the funds selected under the plan.
Mortality charges may increase over time because they are generally linked to the insured person's attained age and the applicable mortality rate. The exact charges depend on the policy terms and other underwriting factors.
A premium is the amount you pay to keep your ULIP active, while a mortality charge is one component deducted from that premium to provide life insurance cover. The remaining premium, after applicable charges, is invested in the selected funds.
Yes. Since mortality charges are deducted from the fund value, they can influence the overall investment value over time. Understanding these charges helps you evaluate the overall cost and potential returns of a ULIP.
Yes. Mortality charges are applicable throughout the policy term for providing life insurance cover, irrespective of whether a claim is made. They are deducted in accordance with the policy terms and conditions.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
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