Administration charges in Insurance
Administration charges are levied on the insured by the Insurance Company for maintaining the policy and also for record keeping and accounting. The administrative charges are generally charged on a monthly basis.
These charges are levied for servicing related purposes as well. For the paperwork, database modification and maintenance, premium intimation, communications, issuance of statements, etc. IRDA has however put a cap on the administrative charge that an insurance company can levy on their customers.
Varied Charges
The charge levied or the conditions of imposing the charges not only vary from insurer to insurer but also from policy to policy. The rate charged may be flat across the full term of the policy. Or it may be increased on a monthly basis. The increase may be pre-determined. For some policies, the administrative charges may remain fixed for initial few years, thereafter; it may increase as per the contract of the insurance agreement.
So, it is always prudent to understand the charges that one will be exposed to during the tenure of the policy. Even if one does not get to know about them while applying for the policy, one may avail the free look facility and cancel the policy without any penalty , if one is not willing to bear the charges.
