Market volatility, especially during a significant crash, can make you feel like you've lost control over your investments. Seeing your ULIPs fund value perform in the opposite direction can put you under stress. This also raises questions for many investors regarding the next step. Whether to stay put, exit, or make changes. Well, during such times, having a clear understanding of your options and a defined process is incredibly empowering.
Instead of feeling overwhelmed by market movements, you can approach the situation with confidence and a strategic mindset. Wondering how to gain that control back in your hands. With this three-step playbook on unit-linked insurance plan fund switching, let’s shed light on managing market investments during crashes proactively.
Key Takeaways
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Unit linked insurance plans uniquely bring life coverage and market-investment-based wealth creation under the same roof. Regardless of fund switching or any event that impacts fund performance, the insurance element remains as it is. Within the ULIP, funds can be shifted among different classes, depending on the market’s sentiment and, more importantly, your risk appetite.
Now, during such times, most investors might miss the ULIP fund's switching features. It is cost-free, and you may make multiple switches in a policy year. It's like being handed a steering wheel on a rollercoaster. Yes, you can’t control the track, but you can certainly brace or ease the journey with timing and direction.
Fund Type | Risk Level | Typical Scenario to Switch Into |
Equity Fund | High | Bullish or recovering markets. |
Debt Fund | Low | During market crash or high volatility. |
Balanced Fund | Moderate | Uncertain market trends, desire for stability. |
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When the market starts tumbling, your first instinct should be to act immediately but remember to take any step wisely. The quick responses are rarely rewarding and mostly incur losses. Therefore, the first thing to do at this time is to understand:
Is this a correction (a short-term dip), or does this seem like the onset of a longer-term recession? Look for macroeconomic indicators, trends in inflation, interest rates, geopolitical risks, or company earnings that might explain the fall.
Recently, investors lost ₹16.97 lakh crore in 5 trading days amid negative market sentiment.
Source: TOI
Are you heavily invested in equity funds? What has been your fund’s 3- and 5-year performance? Are your ULIP investments based on how much risk you can bear and your financial goals?
Leverage the benefits of an ULIP calculator to study your portfolio mix and overall performance. This will give you clarity before deciding to switch. Don’t act on a single day’s market dip. It is advisable to watch the trend for a good number of trading sessions to determine if a switch is warranted.
Identifying a falling market and reviewing your portfolio is only half the task. Acting on it requires a personalised and well-aligned approach that fits your financial goals.
The outcome of a fund switch is not guaranteed and can differ significantly. For example, if markets have fallen by 10–15% and you’re more than five years from your goal, consider switching 25–40% into debt.
This helps protect part of your money from further loss. Conversely, at the same time, by keeping the remaining 60–75% in equity, you stay invested in the market. So when it bounces back, your investment also has a chance to grow again.
Switching to debt during crashes is a protective move, not an exit. The real benefit is realised when you switch back into equity during recovery, when everyone else is still fearful. When the market crashes, selling equity investments in panic is a common behaviour that attracts losses. Very few are brave (or informed) enough to re-enter the market early during recovery because fear still lingers.
When switching back into equity during the market recovery’s early phase, you’re essentially buying more units at cheaper prices. As the market recovers fully over time, these units increase in value.
Consequently, it gives you higher gains than those who waited too long to return. This principle is a key part of what seasoned investors call “buying low and selling high”. It works especially well when guided by a strategy, not emotion.
Once you notice signs of stabilisation like falling volatility, steady NAV growth, or positive economic data, it’s time for the next step. Gradually, start moving your funds back into equity or balanced funds. Instead of one lump switch, you can follow a phased approach. For example:
Week | Action |
Week 1 | Switch 20% of debt allocation to equity. |
Week 3 | Switch another 30% based on trend. |
Week 6 | Re-evaluate and move the remaining gradually. |
Remember, unit linked insurance plans are often long-term instruments. You are not timing the market for a trade but rebalancing to meet goals like retirement, child education, or long-term wealth creation.
Before you decide to leverage a ULIP calculator to switch funds, you must have a full-proof strategy. It may appear to be a smart move when markets get unpredictable, but falling into classic traps can hurt long-term returns. Here's a list of common investor mistakes you must know about:
The fundamental truth of investing in market-linked instruments like unit linked insurance plans is that volatility is inevitable. With a defined switching strategy, you’re charting a course through it. Another important thing to remember is that crashes are often followed by rebounds.
Nevertheless, to benefit from that rebound, you must stay invested, stay aware, and most importantly, stay strategic.
Some insurance providers offer more flexibility, better online platforms, personalised switching advice, and detailed portfolio analysis tools. At Canara HSBC Life Insurance, our ULIP offers the following:
Zero fund switching charges for multiple switches per year.
A smart interface to manage your fund allocations digitally.
Access to diverse fund options that may include equity, debt, hybrid, etc.
Portfolio strategies tailored to your life-stage and goal maturity.
When markets crash, you have two choices. Either you can freeze in panic or take action with clarity. Switching funds in a unit linked insurance plan is all about minimising losses and ensuring profit continuity. The three-step playbook equips you with a framework to act not from fear but with confidence.
More importantly, with partners like us, you can enjoy both smart ULIP solutions as well as online calculators. Stop worrying about staying in command, make your investments future-ready with us today.
No, fund switches do not impact the life insurance component of your ULIP. Your life cover continues as per the original policy terms, regardless of how many times you switch funds.
Many ULIPs offer a fixed number of free switches each year. However, if you exceed this limit, a nominal fee may be charged depending on your insurer’s policy.
Switching is ideal during market ups and downs, or if your financial goals or risk appetite change. It helps get your investment strategy in alignment with your evolving needs.
To make a switch, you can use the insurer’s official website or mobile app, or connect with their customer care team.
Yes, most insurers allow a limited number of free switches annually. Beyond that, additional switches may attract charges as per the policy’s terms and conditions.
No, switching funds within your ULIP does not restart the 5-year lock-in. The lock-in is linked to policy duration, not investment switches.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
Canara HSBC Life Insurance offers online ULIP plans that blend life insurance protection with investment growth, helping you build wealth while securing your family's future.
