Switching funds in an existing ULIP is very beneficial as it gives you the desired safety against fluctuations in fund performances as per market conditions. Once you invest in a fund, the performance and the resulting dividends from it may not remain stable and may vary as per the market. Therefore, once you can check that the projected performance of a particular fund is not satisfactory, you can switch to other available options and hence, keep your overall gains stable.

Although it is not possible for investors to time the markets or anticipate the ups or downs — you can cut your losses if you are not happy with a fund’s performance or foresee a dip in the market. In volatile markets, you can switch to safer funds and optimise opportunities. Depending on marketing conditions, your ULIP product option and your risk appetite, you could transfer your investment to debt funds, and switch these back into equity once the market picks up again. This will help leverage different stages in the market cycle. Some unit linked insurance policies allow switching of funds in line with one’s goals. Nearer to your goal, you can switch to a debt fund to reduce risk and protect your capital.

Fund Switching

In case you’re thinking about how to switch funds in ULIPs, all you need to know is that you will need to fill a fund switch form or write to the insurer giving clear written instructions to transfer funds. You will also need to mention exact details of the amount to be transferred, your plan and funds and new fund opted for. It is advisable to consult your financial advisor or the fund manager before you switch funds, as your risk appetite, age, goals and dependents are the other factors to consider before switching.

ULIPs offer balanced fund options to their customers. Mostly, each ULIP can invest in a minimum of 4-5 funds and the policy-holder is allowed to choose the funds where his/her money will be invested. Most ULIPs do not charge for the initial 5-6, or even 8, switches at times. For more than this, they may charge anywhere around Rs 50-300. Some ULIP policies have unlimited free switches altogether in policies enabling policy-holders to make as many switches as they wish during a policy year.

Policy-holders can also manage fund switches through self-service facilities offered by life insurance companies found on their portals/mobile app. You just have to log in to the insurer’s portal using your user name and password. Then you have to put the percentage of funds to be transferred from the old fund to the new one, following which the insurer will process your request shortly. Also, if you are not market savvy and want to know how to switch funds in ULIPs, you must choose the option of automatic fund switching. In such cases, the fund manager will automatically switch your funds between equity and debt on your behalf.

Also before knowing how to switch funds in ULIPs, it is better to know the importance of fund switching. The fund switch option is a convenient way for investors to protect their investments from market fluctuations and maximise returns by balancing their investment portfolio between debt and equity. The switching of funds should be done considering your risk appetite, volatility of the stock market and your financial goals.