It’s hard to miss the Aegon Religare Invest Maximiser Plan advertisement in media. The company claims that it is the cheapest ULIP plan available in the market. The company goes to the extent of saying that if someone is able to find a cheaper ULIP, the company will reward the customer Rs 1000. That is indeed very heartening to see, because lot of insurance companies levy a number of charges in a ULIP, which a common customer is not aware of. All these charges eat up money which otherwise would go into investments and generate returns for the customer.

So what is it that makes this ULIP different from other market linked insurance plans currently available in the market? The product brochure mentions “A product with a low premium allocation charge to help maximise your investment.” So let us see the charges in the plan:

1. Premium Allocation Charges (PAC)

This is the percentage of premium deducted towards charges from the premium received. In short the premium amount that is invested is net of this premium allocation charge (PAC). For example if the premium paid is Rs 50,000 and the PAC is 20% in the first year, then Rs 10,000 will be deducted as PAC and the remaining Rs 40,000 will be invested on behalf of the customer. The PAC is high in the first year and varies from insurance company to company. In case of some insurance companies the PAC charge varies from as low as 10% to more than 50% of the premium paid in the first year and gradually reduces from the second year onwards.

In case of Aegon Religare Invest Maximiser Plan the PAC for the first year is 5%. For the 2^nd, 3^rd and 4^th year the PAC is 2% and from the 5^th year onwards the PAC is Nil. So the PAC in this plan is less than similar plans available in the market. So in terms of PAC this plan definitely scores over its competitors in the ULIP category. Also in case of lot of plans the PAC is charged for all the years whereas in this plan it is charged only for the first 4 years.

2. Fund Management Charge (FMC)

This charge is levied as a percentage of the value of assets. For the enhanced equity fund in this plan, the FMC is 1.25% per annum, which is very much similar to unit linked plans of other companies in the market.

However the company brochure mentions the company can increase the FMC after taking approval from Insurance Regulatory Development Authority (IRDA). But the company also mentions that this charge shall in no case exceed 2% per annum at any point of time.

3. Policy Administration Charge

This charge is levied at the beginning of each policy month from the policy fund value by cancelling units worth the amount to be charged. For example if the policy administration charge for a particular month is Rs 44 and the NAV of the unit is Rs 11 at that point of time, then at the beginning of the month the policyholder’s 4 units will be cancelled and the policyholder’s total units will get reduced by 4 units.

In this plan the policy administration charge is Rs 40 per month for the calendar years 2009 and 2010. Thereafter from 1^st January 2011 the policy administration charge will increase by 5% compounded every year.

The above charges are calculated taking into consideration 5% compounded increase from Jan 2011 onwards. This charge also varies from insurance company to company.

4. Mortality Charge

This charge is levied at the beginning of each policy month by cancelling units worth the amount to be charged. This charge is levied against the life cover (sum assured) provided by the insurance company. This charge depends on the age of the life insured. Once the fund valued exceeds the sum assured amount, the insurance company is not exposed to risk of life cover. In this case the fund value is paid if death happens as the fund value is more than the sum assured. This charge is levied by other insurance companies also in their ULIPs.

5. Miscellaneous Charges

Apart from the above charges, there are switching charges, premium redirection charges and partial withdrawal charges. These charges are levied after the customer avails the service above the maximum free threshold. These charges are levied by other insurance companies also in their ULIPs.

6. Surrender Charges

In this plan the customer can surrender the policy anytime after the first 3 policy years. There is no surrender charge after 4 policy years.

In this plan there are no surrender charges after 4 years. Normally in ULIPs of some other companies, the surrender charges apply for a longer time period than 4 years. So in case of surrender charges this plan scores over some other ULIPs.

Other Features

This plan also allows the investor to increase the premium subject to certain conditions. The life insured can also avail riders like Accidental Death Benefit Rider, Accidental Dismemberment Rider and Permanent Total Disability Rider. The policy also offers special units which are added to the account at the end of 10th year and every 3rd year thereafter. The value of special units would be equal to 1.50% of the average month end fund values of the last 36 months before the allotment of special units. These units are also known as bonus units or loyalty units or persistency units. The tenure of this policy is for 25 years, but the customer can exit the plan anytime after 4 years and take the entire fund value without any deductions as the surrender charges don’t apply after 4 years.

Conclusion: The policy definitely offers some benefits in terms of low initial policy allocation charges and surrender charges as compared to other ULIPs, but if compared to ELSS plans it still lags behind. ELSS plans have no initial charges, after SEBI ordered removal of entry loads from mutual funds. Also ELSS plans don’t have policy administration charges, which are charged by ULIPs. But ELSS plans charge Fund Management Charges of round about 2.25%, which in case of ULIPs is around 1.25%. Also ULIPs offer switching facility which allows the investor to switch his funds between equity, debt and balanced funds. This switching facility is not there in ELSS plans. So both ELSS and ULIPs have their own advantages and disadvantages. The investor should select a plan based on his/her requirement.

So far under this plan, Aegon Religare is offering the cheapest ULIP. But as competition picks up and other insurance companies start feeling the heat, they will also come out with similar offerings or even better it, in order to protect their market share and to win over new customers. If that happens, ultimately the customer will be the winner in this competition between insurance companies. The customer will get more value for his rupee. We can only hope that Invest Maximiser Plan doesn’t remain the cheapest plan for too long and as a result of this “Customer will be King”.

This article is written by Gopal Gidwani. He can be contacted at This e-mail address is being protected from spambots. You need JavaScript enabled to view it for any queries on Financial Planning, Tax Planning and Investments. He is an qualified Associate Financial Planner (AFP) in Investment Planning, Tax Planning, Insurance Planning and Retirement Planning.