Things to Know About Online Switching of ULIPs

ULIP is an excellent investment that allows you to get insurance protections as well as returns on investment. It allows you to choose the funds that you want to invest in and switch it as and when needed. Read on to know more about switching of funds in ULIPs.

ULIP or Unit Linked Insurance Plan is the only insurance scheme in India that offers the dual benefit of insurance and investment. Investing in ULIP is a great way to safeguard your family from the various unforeseen risks as well as get valuable returns in the long-run. ULIPs not only allow you to invest in the funds of your choice, but also give you the flexibility to switch your investment in different funds as per your changing financial goals, and risk-taking capacity. This is called fund switching or online switching of ULIPs.

The online switching of ULIPs allows you to change your fund portfolio to keep it safe from market volatility and avoid loss. The fund switching option is convenient and it does not involve paying any penalty or charges. Some of the insurers allow the free fund switch 3-4 times in a year. If you have invested in ULIP plans, you must know the following things about switching of ULIPs.

Benefits of online switching of ULIPs

The most significant benefit of switching ULIPs to leverage the funds’ performance and get higher returns. If one or more funds in your portfolio are not performing to your expectation or are yielding much lower returns as compared to other funds, you can use the switch fund option.

You can transfer the units partially or fully into different options. Like you can switch your investments in equity-related funds to debt funds or vice-versa. However, to ensure that you get maximum benefit from the switching of ULIPs, you must keep a close track of the funds’ performance so that you can make an informed decision. Tracking the scheme’s performance in ULIP is easy as the insurers periodically declare the net asset value.

When should you exercise the switching of ULIPs option?

As an investor, it is nearly impossible to predict profit or loss, you can switch your investment to safer funds so that you can mitigate the market volatility and have better chances of earning decent returns. You can transfer a major portion of your portfolio to debt funds and switch back to equity funds later when the market rises and is stable.

If your policy is about to mature or if you are nearing your financial goals such as a child’s wedding or education, it is better to park a major portion of funds in the safe debt funds a few years in advance. This will give your portfolio much-needed stability and minimise the risk of loss due to market volatility.

What is the process for switching ULIPs?

Most of the insurers in India give two options to execute the switch option.

Form submission

To execute your ULIPs switch you must submit a duly-filled form at the insurer’s office. You must mention the details of the amount that you want to transfer, and about the existing fund and the new fund option. Based on your switch request, the insurer will transfer the funds to the new fund option.

Insurance portal

Today, with the insurers offering online services, you can manage the fund switching through the online portal of the insurance company. Log onto the insurer’s portal with your user name and password and enter the details relating to the fund switch. You must be specific with your instructions, in terms of the percentage of funds you want to transfer. Based on the request, the insurer will process the transfer.

If you are a first-time investor and have sufficient knowledge of how the market functions, you can opt for an auto-switch option wherein the fund manager will automatically switch your funds equity to debt funds and vice-versa to generate maximum returns and reduce loss.