The agent selling the unit linked insurance plan (ULIP) told you that it was the latest buzzword in the insurance industry. Without knowing much about ULIPs you still bought the insurance policy.

The very next month you received a statement from the insurance company giving you details about your ULIP statement. While a lot has been written about ULIPs, their advantages and disadvantages, very little has been written on how to read the ULIP statement of the plan. Many agents would say the statement is very similar to a mutual fund statement.

But when you receive the statement and look at the various heads your head starts spinning. Not many agents who sell you these policies can confidently identify with all the heads in the statement. I get many frantic calls asking about the various charges mentioned in the statement that are not explained to customers at the time of the agreement. However enough information is available on this one and best left alone and we just dwell on the former.

Here is a brief guide for reading your ULIP statement.

Though all insurance companies follow different formats the following are standard heads:

~ Date: On which the statement is issued.

~ Name and address: States the name and address of the policyholder, that is, you if you own a ULIP policy. If there are any discrepancies like misspelled name or wrong address then inform your agent or the insurance company and get it rectified immediately.

~ Product name: Gives the name of the scheme you opted for.

~ Policy tenure: It states the number of years, for which the policy is opted for.

~ Policy number: This number is unique. It is very important that you also note down this number, as it is your identification number for any future correspondence with your insurance company.

~ Policy date: States the date on which the policy was issued.

~ Next due date: States the date on which the next premium is due.

~ Premium: States the amount you have to pay as premium.

~ Mode: States the premium paying term whether quarterly, half yearly or yearly.

~ Insured: Gives the name of the person for whom the policy is taken.

The most important information that interests all of you would be the amount invested and the associated never-ending charges.

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As mentioned earlier different insurance companies give different formats, the table given below is an extract of a standard ULIP Unit statement with its various heads followed by detailed explanation.

Premium paid is assumed to be Rs 15, 000 semi-annually, that is, every six months.

~ Transaction date: States the date on which the transaction was executed.

~ Transaction description: Shows the various transactions such as:

Fund name: States the name of the fund in which you have invested. In the above example it is a growth fund.

Opening balance: Also known, as balance carried forward. It is the balance from any previous transaction. If the premium is the first premium that is being invested then opening balance will always be zero.

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Premium invested: From the total premium paid how much premium is invested. In the above example from the premium of Rs 15,000, Rs 11,250 is invested. The balance is deducted as fund management and policy fee charges.

Administrative or policy charges: Are the charges that will be deducted every month. No exception. In the above example Rs 38 is deducted by way of deducting 1.351064 units (38/27.796) from unit balance of 1,025.163998. All insurance companies have different administrative charges.

Life risk charges or mortality charges: A charge for providing with the death or critical illness cover, whichever is selected. The amount of charge every month depends on the insured's age. These charges are deducted by deducting the units from the Unit balance. In the above example Rs 30.75 is charged by deducting 1.093295 units (30.75/27.796) from unit balance of 1,025.163998. These charges increase with age. If you are paying top-up premium then further charges are deducted from top-up premium.

Service tax: Again this is deducted by way of units from the total unit balance. In the above example 0.133683 units are deducted as service charge. There are other charges which get deducted from the value of the fund if you execute them which are:

Fund switching charges: You are allowed 4 or 5 switches per year free depending on the fund house and after that you are charged for any further switches.

Partial withdrawal charges: If you are withdrawing money from your fund after the initial three years then you pay a charge on the withdrawal amount. This can vary between 30 to 40 percent. So be very careful about partial withdrawals.

Premium redirection or alteration charges: Is up to Rs 250 per request.

Premium holiday charges: Are the charges, which you have to pay in case after the first three years � which most ULIPs allow as their USP -- you stop paying premium. It's a percentage charge on the fund value that is deducted every year till you restart paying premium.

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Surrender charges: Again depends on when you are surrendering your policy.

All the above charges have maximum limit. But please do read the prospectus very carefully before selecting ULIP as they might write in bold that there are no fund switching charges but the small print may also state that only few switches are allowed and the rest are chargeable.

Amount: States the premium invested as well the amount of various charges deducted.

Unit price or net asset value (NAV): It is same as per share value or net asset value of a mutual fund. It is the per unit price.

Units allocated/cancelled or just units: Are the units allocated for the premium invested and also units deducted for various charges. In the above table the total units allocated for premium invested are 404.734495 and units deducted are 2.578042 (1.093295+1.351064+0.133683).

Units balance: States the opening balance as well as the total after adding the new units purchased.

Value (Rs): Gives the value of the premium invested as well as the value of the fund as on that particular date. In the above example the value of the fund is Rs 28,423.80 (1,022.585956*27.796).

Also, read the coverage information details, which include the sum assured, effective date and the expiry date of the policy. It is stated after the above given table. It is very important and advisable to read the notes given below the transaction details for your clarification and assurance as many times you may be misinformed.

As said in my previous article on how to read a mutual fund statement this guide is also best read and understood with a statement in your hand.

The author is a financial consultant and can be reached at dhanplanners@rediffmail.com.