Now that LTCG (Long Term Capital Gains) Taxes have been reintroduced 10% LTCG tax is being imposed on equity-oriented mutual fund schemes, ULIPs have become the most sought-after investment instruments for both seasoned and newbie investors.

It’s absolutely no brainer why ULIPs have become the next-gen go-to investment option. ULIP plans offer triple-fold benefits – lucrative investment opportunities, comprehensive life cover option and easy tax saving opportunities.

Here’s how ULIPs work: The premium paid by you is invested in the investment funds of your choice. And this investment is further invested in multiple qualified and lucrative investments such as government securities, bonds or stocks by the life insurance company.

We’re sure you’re wondering: Does ULIP help generate earnings on investment like mutual fund schemes? The answer is a resounding YES! Here’s why: As a complete investment solution, ULIPs make it easy for you to manage your investment portfolio according to your budget and preferences. You are allowed to invest in the funds of your choice and switch between investment funds, completely or partially, anytime during the policy tenure without having to pay anything extra.

On the other hand, mutual fund schemes do not allow investors to investors to switch funds and even if an investor chooses to surrender the fund and switch to another investment fund, they are required to bear the exit and entry load charges.

But here’s the sad part: there are a lot of investors who remain unaware about the fund switching options available under ULIP plans.

And in this post, we are going to answer everything you need to know about ULIP fund switch options.

So without further ado, let’s dive right in!

How does ULIP Investment Fund Switch Work?

ULIP plans allow you to invest your hard-earned money in different types of funds including Equity, debt, Income, Fixed Interest and Bond Funds, Cash Funds and Balanced Funds. As an investor, you can choose to move between different types of investment funds available under your ULIP to suit your budget and investment needs. And this feature of moving between investment funds is referred to as Fund Switch under ULIP plans.

So, if you’ve opted for debt funds and the market isn’t conducive for debt investments, you may move to equity fund option using Switch Fund facility. Similarly, if your investment goals include generating a steady flow of income, you may switch from equity to debt funds. And if you’re looking for the best of both worlds, you may choose to split your investment between equity and debt investments according your requirements.

How to Avail Fund Switch Option Start in ULIP Plans?

Almost all new-age ULIPs come loaded with the in-built feature of fund switching options. However, there are a few ULIP plans that require you to register to avail the option. The process of registering for ULIP plan fund switching option is way simpler than looks. All you need to do is to visit the official website of your Life Insurance Provider and login to your ULIP plan’s account. Once logged in, you may choose to enable or disable ‘Fund Switching’ option.

Alternatively, if you wish to do it offline, you’ll need to visit the nearest branch of your Life Insurance Company and get a ULIP Fund Switch registration form. Now, simply fill up the form and submit it to the branch. Don’t forget to add a self-attested copy of your photo identity proof, including driving license, Aadhar Card, Passport or Pan Card, when submitting the form.

What are the Benefits of ULIP Fund Switch Option?

Unlike most other life insurance products, ULIP plans make it easy for you to generate high returns on your investments. Remember, optimizing your investment portfolio regularly is the key to successful investment. And this is where ULIP Fund Switch option comes to your rescue. This feature helps you safeguard your investment against the highs and lows of the stock market. Thus, you end up earning higher returns even when the market conditions are volatile by using the fund switch option.

Let’s take an example to better understand how fund switching helps you secure your investments against market volatility. Suppose you opt to invest 60% of your ULIP investment funds in debt instruments (low-medium risk) and 40% in equity instruments (medium-high risk) to ensure safe returns.

Now, if the market starts trending upwards for equity instruments, you can choose to move 60% of your debt investment into equity and 40% of your equity investment in debt. This will help you help you generate high returns on your investment really quickly, while safeguarding 40% of your overall investment against all possible market threats. And when the market starts down-trending for equity investment, move the majority of your equity investments to debt. We hope now you understand how you can quickly optimize your returns using ULIP fund switch option.

But here’s the deal: only market conditions do not determine when to switch funds under ULIP plans. Your overall risk tolerance and age also plays a crucial role in the decision. For example, if you’re young and don’t have many liabilities, your risk tolerance will be higher. Resultantly, you will want to invest majority of your premium in equity market. On the other hand, in later stages of your life, you’ll want to ensure that your investments are safe and thus, you will want to switch majority of your investment towards debt funds.

Is There A Cost For ULIP Fund Switch?

All ULIP plans allow policyholders to switch between funds of their choice, either completely or partially. Some allow unlimited fund switch options, while some offer just 10 to 12 free switches in a year. Once you exhaust the number of free switches allowed, you may choose to pay a nominal charge of 0.50%, subject to a maximum of Rs.550, to avail fund switch options.

Over to You!

So there you have it – everything you need to know about ULIP Fund Switch Option. Remember, if you smartly use this amazing feature, you can optimize the returns on your investment. As the market condition changes frequently, you must always keep an eye on your ULIP plan’s Net Asset Value (NAV) to decide when to use fund switching option to your advantage.

Best of Luck!