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Fund switching is a feature of ULIP which enables the policyholders to shift their money from one fund to another within the same plan. Policyholders can choose the fund as per their financial goals and risk tolerance.
A thing to keep in mind is that insurance companies allow limited switches. There are charges applicable for every switch after a certain number.
Why would you switch funds?
Fund performance varies according to market conditions. If the fund that you have chosen is not performing upto your expectations, you can move your money to a fund that could fetch you better returns.
Hence, you should track the performance of ULIPs to understand if the fund performance is up to your expectations.
Key Factors to consider before fund switching
Risk Appetite:
Your capacity to take risks should be the first factor that you must consider before switching funds. Accordingly, you can choose debt or equity funds.
Speak to a financial advisor or expert to understand your risk appetite.