NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Life Insurance Products
In a unit linked insurance plan (ULIP), which charge is deducted by cancelling units and covers the cost of the pure life cover?
The mortality charge pays for the life cover in a ULIP and is typically recovered by cancelling units. Fund management charges are built into the NAV, allocation charges come out of premium, and discontinuance charges apply only on early exit.
- AFund management charge
- BMortality chargeCorrect
- CPremium allocation charge
- DDiscontinuance charge
Explanation
The mortality charge pays for the risk cover and is usually deducted by cancelling units each month. The fund management charge is reflected in the NAV, the premium allocation charge is deducted from premium before investment, and the discontinuance charge applies on early exit.
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