Definition
Top-Up Premium
A top-up premium is an additional, voluntary lump-sum payment into a ULIP over and above the regular premium, to boost the investment.
Top-ups let policyholders channel surplus cash into their ULIP, benefiting from the same fund management without opening a new policy. A small portion of each top-up may attract an allocation charge, and regulations require a minimum sum-at-risk uplift on top-ups, which can add a little mortality cost.
Top-up premiums are subject to their own short lock-in. They are a useful way to deploy bonuses or windfalls inside a tax-advantaged wrapper, though investors should compare the net-of-charges outcome against simply investing in mutual funds.
Related terms
- Premium Allocation ChargePremium allocation charge is a percentage of a ULIP premium deducted upfront before the balance is invested in the chosen funds.
- Partial WithdrawalA partial withdrawal lets a ULIP holder take out part of the fund value after the lock-in period without surrendering the policy.
- 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.