Fund Switching in ULIP

What is fund switching in Unit Linked Insurance Plan (ULIP)?

 

Fund switching is an option that your ULIP plan gives you. You can choose between the available funds and start the investment and then change your allocation in the funds in any proportion.

For example, if you had opted for a higher allocation in equity, but later chose to move a part of your investments towards debt or balanced funds, you could just switch the funds without having to change your investment product. This is a unique benefit of Unit Linked Insurance Plans . By switching, you simply move your units from one asset class to another based on your risk tolerance and financial goals.

 

Benefits that ULIP fund switches offer

 

When done in the right manner, switches could be beneficial for you. Let us take a look at the benefits that ULIP fund switches offer:

1. Allows you to deal with market fluctuations

   While no one can really predict the changing market trends, one can monitor the trends closely. For example, if you feel that there is a possible correction in the market, you may shift your funds wholly or partially into debt funds, in order to safeguard the investment.

2. The fund switch is tax-free

   A ULIP fund switch does not attract taxes, as there is no capital gain taxation for fund switches in ULIPs.

3. You could get multiple fund-switching options

   Some ULIPs today offer the advantage of unlimited fund switches. Other plans have a definite number of switches that are allowed free of cost, while there could be a nominal fee for the remaining.

4. Investments can be in line with your life goals

   As you move ahead in life, your current financial situation, as well as future financial aspirations, may undergo some changes. ULIP fund switches allow you to manage the investment effectively as per your changing needs and changes in asset allocation and financial goals.

How does ULIP fund switching work?

 

Fund switching in ULIP is a great option for an investor, as it allows you to protect your investments from the ups and downs of the market.

Fund switching may be considered as one of the major advantages of ULIPs. As there are different types of investment funds in a ULIP, you can choose the ones that are suited as per risk appetite and your financial goals. Through fund switching, you have control over your investment and can keep changing your allocation in the different asset classes. Also, you may choose to switch between the funds wholly or partially depending on your preference or as per the market fluctuations.

 

How to make switch/ shift funds?

Fund switching in ULIPs is a process that might take some research on your part. Once you are certain about the switch, the process will not take you very long. Fund switching can be done both online and offline.

For offline fund switching, you might need to visit the nearest company office, online transactions can be done via the insurer’s web portal with your login credentials.

 

Bajaj Allianz Funds

 

The fund options under Bajaj Allianz offer something for every kind of investor. Depending on your financial needs and risk appetite, you can choose any of the following or a combination of them. Typically, the funds can be classified into the following categories:

1. Equity Funds

   When you choose equities, your premium is invested in the equities of listed companies that can be large cap, mid cap or small cap. Here, the main objective is capital appreciation.

   Risk-o-Meter - High risk

2. Debt Funds

   Here, the investment is made in debt-based securities and other income instruments, such as corporate bonds, debentures, etc. As they carry medium risk, they offer more stability as compared to equities.

   Risk-o-Meter - Medium to low risk

3. Liquid Funds

   Also called cash funds or money market funds, here, the funds are invested in debt securities, which come with high credit ratings. As they are easy to redeem, they are highly liquid and are ideal for the short term.

   Risk-o-Meter - Low risk

4. Balanced/ Hybrid Funds

   These funds in ULIPs allow a mixed asset allocation. Here, as an investor, you can benefit from equities as well as debt funds. You get the advantage of capital appreciation as well as more reliable earnings.

Risk-o-Meter - Medium risk

Bajaj Allianz life insurance fund switching allows you the flexibility to help your investments. Take a look at the options you have:

 

Cost of Switching Funds in ULIP

 

ULIPs come with the innate benefit of spreading your investment across various kinds of funds. The division of the investment can be on the basis of the risk you are willing to take. You have the edge, as the ULIP fund switch allows you to balance your portfolio from time to time.

In some cases, a set number of free fund switches are allowed in a policy year. In case you exceed this number, there may be some charges that you’ll have to pay, depending upon the insurer. The maximum cost of switching funds in ULIP can be ₹500 per switch.

 

Conclusion

 

When there is a change in the dynamics of the market or your ongoing financial conditions, the fund switching in ULIP allows you to better manage your investment.

Monitoring your portfolio closely and carefully can prove to be helpful in Bajaj Allianz Life Insurance fund switching as it will help you build a suitable corpus over time.

 

FAQs

1.  What are some ground rules to switch funds effectively and get good ULIP returns?

   If you are looking to grow your wealth through ULIPS, keep in mind the following rules:

   • Pay your premium regularly and on time
   • The investment funds that you choose should match your risk appetite
   • Master the art of ULIP fund switch to benefit from the changing market trends
   • While partial withdrawals may be allowed, try to avoid them to maintain the corpus.

2. What is the cut-off time for the ULIP fund switch?

   As long as you have paid your premiums, you can request a ULIP switching option anytime you want. If the request is made on a working day before 3:00 PM, the same day NAV will be applicable. In case a request is raised after 3:00 PM, the NAV of the next working day would apply³.

3.  What is the difference between fund switch and fund redirection?

   With ULIPs, you have the freedom to choose between debt funds, equity funds and balanced funds. As per the changing dynamics of the market, you can opt for fund switching. This means that within your policy, you can switch the investment from one fund to another.

   Redirection, on the other hand, refers to the allocation of future premiums to a different fund1. Typically, it is at the time of policy purchase that the desired fund allocation is done. However, in case a policyholder wishes to change the initial/ original allocation, then redirection comes into play.

4. How often can I switch funds in my investment plan?

   In some cases, you can switch between funds as many times as you want. But keep in mind that fund switching may come with a charge. Some companies offer a certain number of fund switches without charge, while some may charge every switch.

5. Is there a limit to the number of fund switches I can make?

   Fund switch means transferring the current funds in the policy to another fund of your choice. Usually ULIPs allow unlimited fund switches, but some could be free while others could attract a nominal fee.

   There is certain limit for switching of funds per year which may vary from insurer to insurer2. Post that, there may be a certain fund switch charge. It is recommended that fund switching should be a well-thought process. When required, try to switch your funds in an organized manner.

 

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