Besides offering the dual benefits of investment and life insurance, Unit Linked Insurance Plans (ULIPs) offer a variety of features that help you safeguard the return against market volatility. Fund switching is one such feature that allows you to tweak your ULIP portfolio and keep it safe from the volatile fluctuations of the market. Switching allows you to transfer the units in your ULIP portfolio, either fully or partially between fund options such as equity funds, debt funds or a mix of both known as balanced funds. Generally, ULIPs offer pure equity, debt and balanced fund options to their customers.
What are the benefits of switching?
Switching is one of the best features of a ULIP plan as it offers you the freedom to move out of loss-making funds. As a ULIP Policyholder, you can track the performance of your ULIPs and switch when necessary, as the premiums are reasonably high and losing money after that will not serve the purpose. It’s very easy to track your ULIP scheme’s performance since the Net Asset Value or NAV is declared periodically. Moreover, details such as fees and expenses deducted and the break-up of the premium and the total amount invested are generally disclosed in the ULIP documents at the time of investing.
When to make the switch?
Timing the markets or in other words, anticipating the market ups and downs is not a feasible option. You can cut your losses if you are not happy with a fund’s performance or foresee a drop in the market by switching to safer funds. For instance, if you want to lower your risks in a volatile market scenario, you could transfer a major chunk of your ULIP investment to debt funds, and switch these back into equity once the market picks up again.
Additionally, you can also make switches according to your life stages or personal financial goals. Younger investors may be more willing to take on risks than older investors. Once you near your investment goals, you can switch to low-risk debt funds and protect your capital.
How to switch?
Switching ULIP funds is a simple process. You will need to fill a Fund Switch Form or write to the insurer giving clear written instructions to transfer funds. However, if you are new to investing its best to consult your financial advisor or the fund manager before you switch funds.
Clearly, fund switching is one of the most convenient features offered by ULIP plans. Most ULIP plans do not charge the initial five to six switches after which a switch may be chargeable. However, if you take up a ULIP plan with Finserv Markets, you can make unlimited switches between funds without attracting any additional charges. To start investing in ULIPs, buy a ULIP plan online with us right here.
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