Aditya Birla Sun Life Insurance Company Limited

Mortality Charges

4.5
Rated by 1 readers

Definition:

Mortality charges in life insurance is the fee imposed by the insurance company in favour of the life protection of the policyholder.

Description:

Generally, mortality charges are involved with Unit Linked Insurance Policies. When an investor subscribes to a ULIP plan,plan the premium paid by them is divided into two parts. One part is dedicated to covering the life risk and the remaining part is invested in market-linked products for wealth creation. The former part includes the mortality charges to provide insurance protection upon the death of the policyholder.

When the investor pays the premium amount, mortality charges along with other charges are deducted by the insurance company before investing the policyholder’s money. The mortality charge is calculated on the basis of the sum at risk. The sum at risk is the sum assured on death minus the current fund value. The mortality charge decreases with increasing fund value. In simple words, the fund value of the policy increases with time causing the reduction of mortality charge.  Mortality charges make sure of the guaranteed1 financial assistance to the nominee in case of the policyholder’s unfortunate demise during the policy period. Monthly mortality charges of any ULIP plan can be calculated using the formula below:

Mortality charge= [Mortality rate (for attained age * Sum at Risk/1000] * 1/12

Mortality rate figures are prescribed by IRDAI and all life insurance companies use the same for the calculation of the charge.

Let us understand this with an example.

Example:

Let’s say Sarthak bought a ULIP policy at age 35. His Annual premium was ₹10,00,000 which resulted in a sum assured of ₹1Cr. As the policy is at a very initial stage the fund value is nearly zero. So the fund at risk is ₹1Cr. Now let us calculate the mortality charge every month he has to pay assuming the mortality rate as 0.15(at age 35).

Monthly mortality charge= [Mortality rate (for attained age) * Sum at Risk/1000] * 1/12

[0.15 * 1,00,00,000 / 1000] * 1/12 = ₹125

So the monthly mortality charge = ₹125

Amount of mortality charge component in the annual premium = ₹125 * 12 = ₹1,500

How much helpful you found for you?

4.5
Rated by 1 readers
0 / 5 ( 0 reviews )
Not helpful
Somewhat helpful
Helpful
Good
Best
Don’t forget to share helpful information in your circle

Thank you for your details. We will reach out shortly.

Thanks for reaching out. Currently we are facing some issue.

Covers Death, Critical Illness,
and Total Permanent Disability

Min 3 characters
+91Icon Phone
Please Enter a valid 10 digit Mobile No.
*This field is required.
Plan Icon Wealth Assure Plus

ABSLI Wealth Assure Plus

Covers death, critical illness, and total permanent disability

ICON-CLICK

5 investment strategies / 16 funds

ICON-CLICK

Premium waiver

ICON-CLICK

Riders benefits

ICON-CLICK

Guaranteed additions

You may Get:
₹4,54,5589

Give:
₹2,40,000

Recently Added Article

⁹ ABSLI Wealth Assure Plus plan for 30 years of a healthy male. Plan type: Classic. Investment option: Smart option. Risk Profile: Moderate. Payment frequency: Yearly. Basic annual premium: ₹24,000. Policy Term: 15 years. Premium paying term: 10 years. Refer to policy brochure for more details. ABSLI Wealth Assure Plus is a non-participating unit linked life insurance plan. (UIN: 109L120V02) ADV/9/22-23/1534