Info abt insurance related terms used by agent/provider

POSTED BY Yogesh Thite ON July 21, 2011 2:43 pm COMMENTS (8)

Hi experts,

Recently I approached one of the leading ULIP provider asking clarifications on why my fund value is so low after 3+ years. Customer care came back with a long email with some terms which I could not understand. Terms are as below. Can you please help me understand same?


1.What is Investment Content Rate and Premium allocation Rate?

— snip from email —

Investment Content Rate:
Premium Paid during year (Rs) / Premium Frequency Premium allocation Rate
Regular Premium Year 1 34%
Regular Premium Year 2 87%
Regular Premium Year 3+ 92%

— snip ends —

2. What is Statutory Charge?

— snip from email —

Service Tax and Education Cess:
Statutory Charge – Currently 10.3% of risk benefit charges, (deducted monthly by cancellation of units)

— snip ends —


Looking forward for further communication,




8 replies on this article “Info abt insurance related terms used by agent/provider”

  1. Yogi says:

    Hi Manish,

    Thanks for response.

    I think yes, I am not taking the responsibility. I should get over it ASAP.

    About reading the internal rules and other details, I didnt do that as other millions of people (atleast 3 I know who are with me in this 🙁 ). Again that’s my mistake. Unfortunately I learned it in a hard way.

    Anyways, I am not sure if I am finding a right way to get this corrected.

    Let us see if I can find a hope.


  2. Yogi

    You need to take responsibility for this . When you say “though the person (brother of a friend of mine) who actually brought this ULIP policy in my neck ” , you are saying that anyone can make you pay the money for anything they way . thats not true ..

    Its denial mode because of severe loss , you first need to get over it and accept from heart that no entity other than you is responsible for this. Its only you . Only then you can move on from this point , else you will keep blaming the whole world for what happens with you ;.

    Did you try to find out what are the returns from the policy , what are the internal rules of the policy , I am assuming that like millions of people , you also didnt do anyting . Am I right ?


  3. Yogi says:

    Thanks for information ramesh.

    Fund name is: HDFC ULIP Growth Fund !!

    I think I should seriously think choosing between wipe n ripe..

    Thanks alot for information you provided.



  4. Yogi says:

    Dear Ramesh, thank you for input. I think I will have few sleepless nights before correcting this loos (if so).

    I am sad to know that this is severe loss – though the person (brother of a friend of mine) who actually brought this ULIP policy in my neck – kept me telling that dont expect anything in initial 3 years. Your money will ‘ripe’ after 5 years.

    What shot gun would you suggest in this scenario? Please let me know. 🙁


    1. Ramesh says:

      What is the exact policy name?

      8% premium allocation charge will require atleast a return of 8.92% just to recover that. This is a total waste, in my opnion.
      Since your premium amount is 30k, I think your insurance will be 1.5 lakhs which is not helpful at all.

      It is better to use “wipe” instead of “ripe” in this particular case.
      You should start from scratch. Do:
      1. A proper term insurance. One in number.
      2. Proper amount of emergency funds
      3. Proper investment vehicles. Keep them simple and manageable. One or two equity or equity-oriented mutual funds for long term portfolio. A debt fund for short and medium term goals.

      Thats it.

  5. Yogi says:

    Dear Ramesh, Thank you very much for this info.

    My annual premium is 30,000 Rs (i.e. 2500 * 12 months)

    As per the description, I paid:

    1st year – Rs. 10200 (34%)
    2nd year – Rs. 26100 (87%)
    3rd year – Rs. 27600 (92%)

    Actual money invested: 63900

    Out of these many units of 63900, again some of the charges will be taken upon cancellation of units, is this right? for example, snip from email is as below:

    Policy Administration Charge:

    Flat fee of Rs. 60 per month (Charged by cancellation of units)

    Mortality Charges:

    Depends on the age and sum at risk (deducted every month by cancellation of units)

    Here, units worth Rs 60 will be deducted from my units + units worth of mortality charges etc. Is this correct?

    I invested 95,000 Rs till date and my fund value is only 65,000/- Rs. 🙁

    Ohh god… my brain is farted after seeing this calculation !!!

    I think I am in loss. Is this portfolio / investment recoverable?


    1. Ramesh says:

      You have understood correctly.

      And you are in severe loss.

      And I dont think that is recoverable. The major point is the continuing premium allocation rate of 92%, which is absolutely senseless. Think the loss of money as a learning fee.
      Learn and study a lot. You are alone responsible for your finances.
      Though, I will be happy to supply you with a shot-gun. 😉

  6. Ramesh says:

    Premium allocation charge is the amount of money deducted from premium. this is also called front loading. If the premium amount is 50000, your data suggests,
    in the first year, only 34% of it (=17000) was invested, while the rest 33000 was deducted by the company for commission and other things.
    in the second year, 87% of it (43500) was invested, while 6500 was deducted.
    in the third and following years, 46000 will be invested while 4000 will be deducted.

    In total of 3 years, out of 1.5 lakhs as premium, the money which was actually invested has been 1.06 lakhs while 43500 has been deducted.

    So you have been given units worth that amount. From this corpus of units, every month, according to various charges, the appropriate amount of units are cancelled.

    Statutory Charge: is related to out-of-company charges including the service tax and education cess (10.3%). So whatever the company charges, this amount is added to it, and the equivalent units are cancelled out.

    Hope this helps you.

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