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Switch Between Equity and Debt Easily with ULIP-Here's How?

Updated On Oct 14, 2021

A Fund Manager is in charge of the money you put into a ULIP. He invests in a wide range of assets, including stocks, bonds, and other securities.

Typically, you would choose a 'Fund' at the start of your investment. This allows you to steer the fund management toward a specific asset class, such as stocks or debt instruments. After all, your money should be invested according to your needs, right? You may not want to invest in Equity if you prefer a low-risk investment option. And the other way around.

Having said that, you can always swap between Funds if you ever want to change your Fund.

Where Is My Money Invested In A ULIP?

Here is a list of the top four ULIP funds. Make careful to consider your financial objectives and timetable to determine which option is best for you.

How ULIP Can Assist You In Rebalancing Your Portfolio

This is when things start to get interesting. You can always swap between Funds when you invest in a ULIP. You'd have to sell your MF units in one Fund and reinvest them in another if you did the same with a Mutual Fund. This is seen as atonement. As a result, you may be required to pay tax on the earnings you produced (subject to the then Income tax laws). Also, depending on when you sell your investments, some mutual funds may charge you an 'Exit Load.'

Switching between funds in a ULIP, on the other hand, is free of tax and costs. As a result, the process becomes more fluid, with less paperwork. In fact, ULIPs are the only investment option that allows investors to swap between debt and equity many times during a policy year without incurring any fees or taxes.

When Should You Rebalance?

Your financial situation and investment objectives may shift over time. In the same way, your risk appetite fluctuates with time. You may have a lower risk appetite if you have a family of four who relies on your income and investments. However, if you have paid off all of your debts and the number of individuals who rely on your income has dropped, you may be able to take on more risk at this time. You might then desire to boost your equity investments.

Your investments might be influenced by a variety of variables. Bull and bear markets exist in the stock market, for example. Inflation and interest rates, on the other hand, have an impact on debt instruments. When interest rates begin to decline, fund managers may want to begin purchasing debt securities. As a result, debt funds may provide better returns during certain periods. If you're a clever investor, you'll be on the lookout for such shifts in investment trends and may decide to switch between Funds as a result.

How Can I Change Funds In A ULIP?

It's easy to rebalance. Simply select the switching option to change the asset allocation of your money. You have the option of selecting new funds or fully removing old funds.

Here are a few things to keep in mind before switching:

  1. A certain number of free swaps are allowed by insurance carriers. In a year, you can earn anywhere from 4 to 52 free changes. Some plans also include free unlimited switching.
  2. Your insurance coverage, i.e. the sum assured, is unaffected by switching. The amount of your sum guaranteed is determined by the premium paid, your age, and the length of your policy. It has nothing to do with how you allocate your assets.

Automated Rebalancing Is A Novel Method Of Rebalancing

Automated rebalancing is available in many ULIPs. Your fund's value is automatically rebalanced every year or at particular trigger points if you use this feature.

For instance, let's say the goal equity allocation is 50% and the trigger level is 55%. Rebalancing will be triggered if your fund's equity exposure exceeds 55 percent. Your fund would be immediately rebalanced so that the equity exposure was restored to 50%.

A life stage rebalancing option is also available in some funds. Your debt exposure would gradually increase as you grew older in this situation.


ULIPs provide you with two benefits: insurance protection and investment profits. Furthermore, ULIPs allow you to invest in a variety of asset classes, including stock, debt, and everything in between. You can adjust your ULIP portfolio even if your investing preferences and risk profile change over the policy's lifetime, as may occur.

Also read: 

How To Compare & Buy ULIPs In India?

Advantages and Limitations Of ULIPs

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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