Fees in Insurance Linked Policy

From Financial Literacy Wiki

Below is a list of fees charged in insurance linked policy (or ILP).

Policy Fees

Insurance companies will generally charge this fees for setting up and administering your ILP. Set-up costs will be deducted from premiums. Administrative charges are levied monthly or annually by deducting sufficient units at the bid price.

Benefits Charges

The benefit charges is a deduction from the premium to pay for the costs of your insurance cover. The charge is levied by canceling sufficient units at the bid price from the policy.

Front End Fees

Insurance companies charges front end fees to cover the costs of marketing the insurance fund. Some funds may not have this charges but they have higher fund management fees or exit fees.

Fund Management Fees

The fund management fee is paid to the fund manager for his professional service. It can range from 0.5% to 1.75% per annum of the value of the fund.

Exit Fees

Exit fee is charged when you redeem your units from the fund manager. It is also known as redemption fee or back end fees.

Other Charges

Other charges might include agent's commission which is deducted from the premium. Switching fees when you switch between two funds. You should also find out whether there are surrender charges if you decide to withdraw money from your policy or surrender the policy.