What are switches?
This is the facility allowing the policyholder to change the investment pattern by moving from one fund to other fund(s) amongst the funds offered under the underlying product of the insurer. In other words – Switching funds simply means selling your investments from one or more funds and using their value to invest in a different fund (or funds). And you needn’t switch completely out of a fund – you can just move part of your investment if you like.
Why switch funds?
There are a number of reasons that may mean you want to switch funds. For example –
a) Your reasons for investing may have changed over time. What suited you when you started your plan may not suit you today.
b) You may have reviewed your portfolio and are not happy with the performance of your current fund(s). Or
c) You would like your investments to be better spread around different markets.
Depending on the ULIP plan you have invested in, you may link it to a different fund or funds available to that plan or investment. All ULIP plans provide number of fund option to choose. See below table for e.g.
You may also change the fund, or funds, for your future payments and leave the units you have already bought in the fund, or funds, they are in. You can switch in and out of funds at any time to make the most of your investment. In many cases, these switches will be free — you should check your policy conditions to find out how many free switches a year you’re entitled to, as they differ between products.
How to switch?
You will need to complete a Fund Switch form or write to the insurer and give clear written instructions to do this. Exact details of fund switching for your plan or investment are set out in the terms and conditions of the policy document. Before you make any decisions about fund switching, we strongly suggest you discuss the matter with your adviser.
If you need switch form just speak to your adviser or contact your insurer.
Fund Switching Rules
You can switch in and out of funds at any time to make the most of your investment. In many cases, these switches will be free — you should check your policy conditions to find out how many free switches a year you’re entitled to, as they differ between products.
Fund Switching Charge
Generally a limited number of fund switches may be allowed each year without charge, with subsequent switches, subject to a charge. For example – LIC – Market Plus 1, four switches in an year are free for any extra switch, insured needs to pay Rs 100/- per switch.
Uniform cut-off timings for applicability of Net Asset Value of ULIPs as per IRDA. The allotment of units to the policyholder should be done only after the receipt of premium proceeds as stated below –
Allocations (switch in) –
a) In respect of premiums/funds switched received up to 4.15 p.m. by the insurer along with a local cheque or a demand draft payable at par at the place where the premium is received, the closing NAV of the day on which premium is received shall be applicable.
b) In respect of premiums/funds switched received after 4.15 p.m. by the insurer along with a local cheque or a demand draft payable at par at the place where the premium is received, the closing NAV of the next business day shall be applicable.
c) In respect of premiums received with outstation cheques/demand drafts at the place where the premium is received, the closing NAV of the day on which cheques/demand draft is realized shall be applicable.
d) Having regard to the above, insurer shall ensure that each and every payment instrument is banked with utmost expedition at the first opportunity, given the constraints of banking hours, prudently utilizing every available banking facility (e.g. high value clearing, account transfer etc.) Any loss in NAV incurred on account of delays, shall be made good by the insurer.
Redemptions (switch out) –
a) In respect of valid applications received (e.g. surrender, maturity claim, switch out etc) up to 4.15 p.m. by the insurer, the same day’s closing NAV shall be applicable.
b) In respect of valid applications received (e.g. surrender, maturity claim, switch etc) after 4.15 p.m. by the insurer, the closing NAV of the next business day shall be applicable.
c) NAV for each segregated fund provided under unit linked life insurance contracts shall be made available to the public in the print media on a daily basis. Also the NAV shall be displayed in the respective web portals of the life insurer
When to switch?
It is always advisable to do research before switching funds. Switching fund decision would be based on
a) Market condition
d) Your risk taking capacity.
e) Taxes and Stability
FAQ on switch
1. Whether one can switch the investment fund after taking a ULIP policy?
Yes. “SWITCH” option provides for shifting the investments in a policy from one fund to another provided the feature is available in the product. While a specified number of switches are generally effected free of cost, a fee is charged for switches made beyond the specified number.
2. What is the switch charge?
This a charge levied on switching of monies from one fund to another available within the product. The charge will be levied at the time of effecting switch and is usually a flat amount per each switch.