⚠ BETA — all market data shown (deals, filings, prices, indices) is demo / illustrative, not live trading data. For evaluation only; verify before acting.
June 14, 2026
The Dispatch

Definition

Premium Allocation Charge

Premium allocation charge is a percentage of a ULIP premium deducted upfront before the balance is invested in the chosen funds.

Levied off the top of each premium, the allocation charge covers the insurer's distribution and initial expenses; the remaining 'allocated' premium buys units. It is typically highest in the early policy years and tapers later, which is one reason ULIP returns are weak in the initial period.

IRDAI's charge-capping rules limit the total reduction in yield from all ULIP charges, which has compressed allocation charges over time. Buyers should read the benefit illustration to see how much of each premium is actually invested versus consumed by allocation and other charges.

Related terms

  • Policy Administration ChargePolicy administration charge is a recurring fee deducted from a ULIP to cover the insurer's ongoing record-keeping and servicing costs.
  • Unit Linked Insurance PlanA Unit Linked Insurance Plan (ULIP) is a life insurance product that combines life cover with investment in market-linked funds chosen by the policyholder.

Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.