All You Need to Know About Switch Funds Option in ULIPs


Unit-linked insurance plans (ULIPs) are a unique investment product that provides dual benefits- life cover and returns. Hence, people who want one plan that offers insurance and investment benefits should go for ULIPs.

When an investor invests in a ULIP plan, a part of the premium goes towards life cover, and the remaining amount is invested in different investment instruments like equity and debt funds. Hence, ULIPs can provide financial protection to the policyholder’s family. It can also allow him/her to build a financial corpus.

While investors can opt for different funds, they also have the option to switch funds to secure their investment. Thus, the fund switching option can help investors build a stable portfolio.

How Does the Fund Switching Option Work?

In case of ULIPs, you have the option to select the funds for investing your money. Furthermore, if you want to make changes to your portfolio, then you can switch between different funds.

For instance, if you want to earn more returns, then you can switch from debt funds to equity funds. In case you want to lower risk, you can switch from equity funds to debt funds. ULIPs allow you to switch funds based on your financial requirements.

Why is Fund Switching Option Beneficial?

One of the most important benefits that ULIPs provide is the fund switching option. As the stock markets can go up or down, the fund switching option allows you to switch funds in order to safeguard your investment.

For example, 80% of your premium is invested in debt and 20% in equity. In case the market goes up, then you can switch funds to equity. Thus, you’ll be able to maximize your returns.

Charges Applicable on Fund Switching

Most insurance companies don’t charge for the initial few switches. However, in case you make more switches, then you might have to pay a fee.

How Fund Switching Impacts the Life Cover

The impact of fund switching depends on the type of product you’ve selected. While some insurance companies keep insurance and investment payouts separate, there are insurers that offer fund value or sum assured.

  • In Case of Separate Payouts Made for Insurance and Investment

The mortality charges are determined based on the entire sum assured for the plan’s term. As the life cover is decided when you purchase the policy, any change in the portfolio will not impact the cover.

  • In Case of Sum Assured or Fund Value is Offered

The difference between the sum assured and fund value is used to calculate the mortality charges. Therefore, switching funds can impact the life cover. The life cover will depend on the investment value.

How to Switch Funds?

Primarily, there are two options to switch funds-

  • You need to submit a duly-filled form at the insurer’s office. You should mention the amount you want to transfer, the existing fund option, and the new fund option you’ve selected.
  • Another option is to visit the insurer’s website. You need to log in to your account. After that, you need to enter the amount you want to transfer from the old fund to the new fund.

To conclude, ULIPs are one of the most cost-effective investment options that provides the benefit of insurance and investment cover. Moreover, the option to switch funds adds flexibility, thus making it a great option for investors.

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