Fund Management Charge: A fund management fee of more than 1.35 per cent per annum cannot be levied  according to IRDA guidelines.

Guarantee Charges: These charges do not have a ceiling and they come into play while buying a highest-NAV guaranteed ULIP. Charges are usually in the range of 0.40 per cent to 0.75 per cent per annum. One needs to note that guaranteed returns result in the fund having a greater exposure to debt and, therefore, overall returns tend to be lower. It does, however, offer peace of mind to policy-holders with a need for fixed returns. 

Premium Allocation Charge: This charge hogs the attention of policy-holders and insurance agents alike. Several life insurers promote some of their ULIPs as the ones with the highest premium allocation (the lowest allocation charges). While this may seem true at face value, it may not necessarily mean that the total charges are low. Therefore, a customer should always calculate the composite charge over five years while making a comparison. In most cases the overall charges remain the same over a period of time. Some companies deduct lower premium allocation charges and make up for it by keeping the policy administration fee high. Moreover, with the total charge being capped, customers will, by and large, find that the total charges (and the year-wise sub-limits) will be within the limit set by IRDA.

Policy Administration Charge: Some policies state that no allocation fee will be levied after five years. The catch here is that the policy administration charge keeps going up by, say, five per cent every year, which will compensate for the decreasing allocation charges. Intricacies such as this merit the need to study closely the entire charge structure. Concentrating on the charges during only the first few years while comparing policies could lead you to assume that one policy is more cost-effective than another.

 Surrender Charge: IRDA has laid down guidelines on the maximum surrender charge that can be levied by life companies. In the first year, the charge will be six per cent (of the annualised premium or fund value), subject to a maximum of `6000. Similarly, limits have been put in place for the next four years. No surrender charge will be applicable after five policy years.

 Switching Charges: Shifting your corpus from one fund offered by the company to another is a facility offered by all ULIPs. Usually, a certain number of switches ranging from three to 12 in a policy year, depending upon the company and the product, are allowed free of cost. If you wish to exercise the option beyond this limit, you will have to pay switching charges, which could be `100-500 per switch and which vary from company to company. 

Mortality Charge: This amount is deducted from the premium paid in order to arrange for your life cover.Typically, it is arrived at by factoring in your age, the mortality tables used by the industry and also the company’s own claim experience for the category. Some insurers levy differential rates for a simple term plan and a ULIP, although the mortality charge should be the same. Companies tend to hike mortality charges in the case of ULIPs as they need not conform to the charge cap imposed by IRDA.Moreover, some insurers have increased mortality charges.These charges can make a difference while choosing one insurer over another. As the benefit illustration does not take the insurance charge into account, sometimes insurers increase the charges because these go unnoticed. It is for this reason that the customer needs to be wary and compare the mortality charges levied by different insurers separately. 

Miscellaneous Charges : This is a relatively smaller element in the charge structure. It gets activated if, for example, you decide to change the periodicity of premium payment, among other things.Take-home: All companies have to adhere to the cap on charges and, therefore, the total charges over the term of the policy tend to converge. Hence, while buying a policy one should compare the charges in totality rather than focusing on charges only in the initial years. Charges can be levied in varying permutations and combinations. Since the customer’s concern is only the overall cost, s/he needs to look at the benefit illustration closely to determine the total charges payable over the entire tenure of the policy.