Thursday, June 11, 2009

Switching option

There are many insurance companies in India providing insurance to individuals. They have both simple insurance plans and ULIPs (Unit link Insurance Policy). Many people holds the insurance ULIP policies these days.

How ULIPs works?

The premium which we pay for our insurance also gets invested in stock market and other investments. Almost all insurance companies have various investment plans under ULIP. There are all equity plans (all the money invested in share market), all debt plans (money invested in govt. bonds and securities) or the combination of both these plans. These companies also give one option where we can switch these plans based on the market conditions.

People are either not too educated about it or they dont know how to use this option and at what time. The policy which I have, has 3 switch options free in one year. Earlier my money was invested in combination of all equity and debt plan. But as we all see now that markets are improving, I switched my plan to all debt. And now when I check the NAV of this plan it is increasing at very fast rate. It means if I would have not used this option, my fund value would be increasing slowly.

Therefore, I suggest all those people who are having such policies to make use of this option.

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