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Understanding Switch Fund Options Available In ULIP

Published On Dec 29, 2021

You must first understand the benefits of switching funds in ULIPs before you can determine when to transfer funds. Switching is the best ULIP function because it allows you to exit losing dollars. 

Because the net asset value is declared on a regular basis with ULIPs, you can track the performance of your plans. You obtain all the specifics (fees and expenditures removed) or the premium break-up and the total amount invested even when you invest.

Understanding Switch Fund Options Available In ULIP

The following are some of the things to know about Switch Fund options available in ULIP:

1. Switching and Redirection

Switching and redirection are two of the various approach alternatives for dealing with the market's volatility. In unpredictable market situations, these are the two options for managing your returns.

Switching is the process of moving your money from one fund to another, whereas re-direction is the process of allocating future premiums, in whole or in part, to access funds.

As your life evolves, you select your fund based on your evolving risk appetite and financial goals. These are simple choices that safeguard you from market volatility by balancing your investment portfolio between debt and equity.

2. What is the process of switching funds in a ULIP?

Your ULIP money can be put into several equities and debt funds. As an investor, you have the option of switching between several types of funds offered by your insurance company to meet your specific requirements. Fund switching is a service provided by the insurance provider while investing in ULIPs. If the returns on your ULIP aren't to your liking, you can use this procedure to switch from a debt fund to an equity fund. Switch to debit funds, too, if you want a consistent income stream. You can split the quantity of debt and equity money according to your needs if you desire a combination of the two.

3. Best time to switch funds

ULIPs allow you to earn a return on your money. It stands out from other insurance packages because of this feature. The switch fund provides you with the added benefit of generating solid returns despite market volatility. The stock market experiences highs and lows, as you may be aware. You must alter your investments on a frequent basis if you want to make returns regardless of the market cycle. You don't have to redeem your ULIP units, but you can use the switch option to make changes to your ULIP funds. Let's say you invested 70% of your premium in debt and 30% in equity. If the market is improving, now is the time to shift your capital to equity-based investments, with only 30% in debt-based investments as a safe haven. You can play after the market cycle becomes negative. When the market cycle turns negative, you can play it safe by exiting equities funds and concentrating your debt investments. The ability to make such changes allows you to take advantage of various market stages and maximise your profits.

4. In ULIP, what is the cost of switching?

You should be aware of the switching costs connected with ULIPs now that you are more or less aware of when to swap funds in them. Some ULIP providers give an infinite number of switch possibilities, while others limit you to 5 to 10 switch options. A fee of Rs.50 to Rs.500 for each switch is added on top of that. Because market conditions vary quickly, you must regularly examine and check the NAV of your plan to make flipping work. You can get high returns on your investment if you use the fund switch option effectively.


The changeover should be performed anytime the insurance subscriber expects or forecasts that a particular fund will not perform properly over a period of time. However, this should only be done after consulting with professionals and experts and not at random. Switching is also simple. There is also an offline option, in which the subscriber just fills out the fund transfer application and then visits the insurance provider's nearest branch. Details such as the value to be swapped, the new fund option preference, and so on must be provided.

Also read - Where Will My Money Be Invested In A ULIP?

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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