How and why to monitor your ULIPs after purchase

A ULIP is a long term investment that can yield high returns for investors, down the line. However, it is essential to monitor the performance of ULIPs throughout the term of the policy.


A Unit Linked Insurance Plan (ULIP) provides the convenience of having insurance and investment under one plan. However, the choices available under the investment related feature are sometimes not understood well or not utilized to its fullest. Effective monitoring of ULIP is essential after investment.

Related: New to ULIPs? Watch this video to understand Unit Linked Insurance Plans.

Market risks

The investment risk of the portfolio is borne entirely by the policy holder and, thus, needs to be monitored actively. In the first instance, you should ascertain your risk appetite, financial commitments and funding needs before choosing the appropriate plan.

ULIPs come with a range of segregated fund options that you can choose from depending on your needs and risk appetite. Aggressive funds are mainly invested in equities with the objective of maximizing capital appreciation while conservative funds are largely invested in bonds and money market instruments with the aim of maximizing capital preservation. In-between or hybrid options exist as well.

Typically, the kind of funds that are on offer cater to varying needs and risk appetites. It is vital to understand the objective of each of these plans not just at the onset but also on an ongoing basis, because effective monitoring combined with timely switching can reduce risk and maximize returns.

For example, let us look at the 3 types of funds that Aegon Life offers under Aegon Life iMaximize plan:


Related: 5 things to consider before choosing a ULIP

Switch options

The choice of fund category is based on your market view, time horizon, and risk appetite, which might change over time. An investor is allowed to switch the investment from one fund to another at the prevailing net asset value (NAV), which is published daily. You can apply for switch of funds from one segregated fund to another through a Switch Application Form (online or offline). Typically, about 4 free switches are allowed in every policy year, after which a nominal charge is levied. The factors to consider while switching include the performance till date, the market outlook for the category, and your own circumstances (fund requirement, risk appetite and investment horizon). Availability of regular updates on performance and monitoring of the plans becomes critical in the switch decision.

Dynamic strategies

To maximize returns while minimizing risk, it is important to review the updates received from the fund and adjust the allocations between the above funds based on market movements and opportunities. So for example, if there has been a significant run up in the equity markets and there is an upcoming financial commitment that is likely to reduce risk appetite, the allocation may be tweaked towards the Income or Balanced Fund, depending on the specific circumstances.

Related: Financial planning for dummies: a 7 step guide

Persist and don%u2019t surrender in haste

ULIPs are long-term financial instruments. Do not look for short-term gains and do not surrender your ULIPs in a hurry. Closely monitor the market and pick on opportunities. For example, a market crash will actually allow you to buy more units at a lower NAV. Once the market recovers, your fund value will increase, giving you better returns. Simply put, stick with ULIP for the whole term will get you greater returns and always keep an eye on the NAV.

By following these simple steps, long term wealth creation becomes a more natural outcome.

Want to know more? Click here to know how ULIPs compare to Mutual Funds.


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