Switch Investment Mix with ULIPs

Many of us reading this article have invested in ULIPs or planning to invest in it. We are familiar with ULIP as an investment tool that offers insurance also and know that the ULIP full form is Unit Linked Investment Plan. Today let’s understand the switching option offered by ULIP that is not much popular but is nevertheless, an effective feature. Here you will get to know how you can change your investment mix and that too without having to bear any additional costs.

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List of ULIP Funds ~
Fund Name
AUM
Returns (in %)
3 Year
5 Year
10 Year
9,928 Cr
Returns
32.68%
Highest Returns
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27.23%
Returns
18.4%
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2,323 Cr
Returns
27.62%
Returns
30.78%
Highest Returns
Returns
17.46%
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5,652 Cr
Returns
23.49%
Returns
23.59%
Highest Returns
Returns
14.73%
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37,289 Cr
Returns
24.37%
Returns
25%
Highest Returns
Returns
14.71%
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3,556 Cr
Returns
17.44%
Returns
19.29%
Highest Returns
Returns
10.2%
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236 Cr
Returns
21.62%
Returns
23%
Highest Returns
Returns
13.35%
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440 Cr
Returns
18.33%
Returns
20.42%
Highest Returns
Returns
13.81%
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4,557 Cr
Returns
24.41%
Returns
25.88%
Highest Returns
Returns
15.51%
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539 Cr
Returns
18.79%
Returns
19.7%
Highest Returns
Returns
11.51%
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101 Cr
Returns
21.77%
Returns
23.82%
Highest Returns
Returns
13.34%
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3,368 Cr
Returns
21.16%
Returns
22.7%
Highest Returns
Returns
12.36%
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4,348 Cr
Returns
22.22%
Returns
23.77%
Highest Returns
Returns
14.08%
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717 Cr
Returns
-
Returns
-
Returns
-
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3,248 Cr
Returns
20.99%
Returns
24.25%
Highest Returns
Returns
15.09%
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6 Cr
Returns
17.01%
Returns
18.95%
Highest Returns
Returns
10.83%
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78,278 Cr
Returns
18.92%
Returns
19.71%
Highest Returns
Returns
11.79%
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1,335 Cr
Returns
15.06%
Returns
16.68%
Highest Returns
Returns
10.16%
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Disclaimer :
˜Top 5 plans based on annualized premium, for bookings made in the first 6 months of FY 24-25. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in

Being an ULIP investor, you are allowed to change the investment options under your plan. For example, if you find the market favorable, you can change exposure to equities. There is a huge count of people who are unaware of the switch feature available with ULIP. Approximately, only 20% know about this option and less than 5% access it. You might lose some major benefits by not utilizing this feature.

Switching requires a proper analysis of the market and needs the ULIP investor to create a perception of market and decide on his/her risk capacity. The triggering market level can be used to pull your asset allocation with every 10% change. A proactive policyholder is expected to yield good result with clever switching and systematic asset allotment.

Switching feature is free hence you don’t require worrying about the cost, and utilize the option for as many times you wish to. Earlier there was a predefined number set for free switches in a year but not anymore. The process of switching simply requires you to access your policy online on the insurance company’s website and alter the investment mix as desired. In case you are unable to check online, just submit a switch request form to the insurance company.

Switching decisions can be linked to Price to Earnings (PE) ratio of the index by the sophisticated investors. PE is derived on dividing index level by the earning per share (EPS). In April-June 2014-15 the Nifty EPS was Rs 376. The value of EPS depends on the quarterly results declared by companies. On 15 September, Nifty was at 8,040 and PE was 21.38 i.e. little above its average of 18.5.

You are free from any sort of tax implication when switching asset allocation of your ULIP.  Being an insurance product, ULIP offers tax-free long and short- term gains. In case of mutual funds, the tax-free label is applicable only on equity-oriented balanced funds and long-term gains from equity funds. In case of equity funds, short-term gains are taxed at 15%.

The change in market needs proper analysis for availing the switching feature. You could have increased your exposure to stocks a year ago when Nifty was at 5,285 and PE was 15.23. Currently, it is better to cut down exposure to stocks as the index has touched 8000.

˜Top 5 plans based on annualized premium, for bookings made in the first 6 months of FY 24-25. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
+Returns Since Inception of LIC Growth Fund
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
++Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

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