The correct answer is: B. Premium less charges are invested
A ULIP (Unit-Linked Insurance Plan) is a type of life insurance policy that combines life insurance with investment features. The premium paid for a ULIP is invested in a fund, and the policyholder earns returns on the investment. The policyholder also receives a death benefit if they die during the policy term.
The charges deducted from the premium in a ULIP include mortality charges, expense charges, and fund management charges. Mortality charges are used to pay for the life insurance component of the policy. Expense charges are used to cover the costs of administering the policy. Fund management charges are used to pay for the costs of managing the investment fund.
The amount of money that is invested in units in a ULIP is equal to the premium paid minus the charges deducted. The policyholder owns the units in the fund, and they can choose to sell them at any time. The value of the units will fluctuate based on the performance of the underlying investments.
Here is a brief explanation of each option:
- Option A: Entire premium is invested in units. This is not correct, as charges are deducted from the premium before it is invested.
- Option B: Premium less charges are invested. This is the correct answer, as the amount of money that is invested in units is equal to the premium paid minus the charges deducted.
- Option C: Premium less bonuses are invested. This is not correct, as bonuses are not deducted from the premium. Bonuses are additional payments that are made to the policyholder, and they are not used to purchase units.
- Option D: Premium less risk charges are invested. This is not correct, as risk charges are a type of charge that is deducted from the premium.