Premium Allocation Charges (PAC)

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What are Premium Allocation Charges?

In Unit Linked Insurance Plans (ULIPs), a part of the premium you pay is used to cover policy-related expenses before the balance is allocated to your chosen investment funds. These upfront deductions are called Premium Allocation Charges (PAC).

They typically cover:

• Initial expenses for policy issuance
• Distribution and underwriting costs
• Regulatory levies as applicable

How Do PACs Work?

• When you pay a premium, the net premium after deducting PAC is invested in your selected ULIP funds.
• PAC is not uniform. It varies by product structure, policy year, and premium payment mode.

Key Points to Remember

1. Product-Specific
   PAC differs across ULIP products and is clearly mentioned in the policy contract.

2. Regulatory Compliance
   As per IRDAI Product Guidelines (2024), PAC is capped and fully transparent.

3. Long-Term Advantage
   Many ABSLI ULIPs are structured with reducing or zero PAC in later years, ensuring higher fund allocation over time.

Illustrative Example

If your ULIP premium is ₹1,00,000 and the PAC for the first year is 2%, only ₹2,000 will be deducted and ₹98,000 will be invested. In subsequent years, PAC may reduce to 1% or even zero, meaning more of your premium goes directly into wealth creation. (Actual PAC varies as per the chosen ULIP product. Please refer to your specific policy contract for exact details.)

In a Nutshell

Premium Allocation Charges are product-specific deductions applied before your premium is invested in a ULIP. With newer plans like Wealth Smart Plus, Wealth Infinia, and Wealth Aspire, PAC is minimal, transparent, and compliant with 2024 IRDAI regulations, ensuring better fund value for policyholders.

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