Hello and welcome to FundooMoney, your 24X7 buddy for all your money matters. Unit linked insurance plans (Ulips) are long-term investments which provide market-linked returns. They provide an opportunity to the investors to invest in equities through them which have the potential to provide high long-term investment growth. But what does an investor do on finding his or her investment in an Ulip, underperform consistently? We will provide you with an answer to this perplexing question in just a little while.
There are occasions when you find that the funds of your Ulip are performing well below your expectations. Here is what you need to do then.
Compare performance with the right benchmark If your fund is underperforming, you need to find out how equity and debt markets have been faring overall. If there is a universal decline, don’t be perturbed by your fund’s underperformance—things will improve with a market upturn. Of course, you need to check how the Ulip fund has fared compared to its benchmarks. If your fund has fallen less than the benchmark, or your fund has performed better than returns of the benchmark, continue with the fund. However, if your fund has underperformed the benchmark for some time, you should start considering a plan of action with corrective measures.
Ensure minimum investment period Underperformance during a short period of time should not worry you. Volatility is part and parcel of market investments. You need to give it a minimum period of time to start showing results. Ideally, you should consider corrective measures only after underperformance of a year or more.
Check performance of other funds You need to find out how the other funds of the same Ulip are faring. If the Ulip has other funds and they are performing well, you can shift your investment to them via switching facility, typically offered free of cost by the life insurance companies offering Ulips.
Get the exit timing right If your fund is underperforming over a long period and you find no alternative fund offered by the Ulip, you will need to consider an exit. Here, it is critical for your Ulip to have completed the initial lock-in period of 5 years. It is on completion of this period that you can surrender an Ulip and get the money right away. Else, you can discontinue your Ulip premium and wait for lock-in period to get over to receive your surrender proceeds.
We hope you found this useful. Do share your views and tips on how to deal with underperforming Ulips with us and other in the channel, by writing in the comments section. For more such actionable personal finance information and regular uploads, subscribe to our channel. Also, visit our website, download our mobile app and stay connected with us on Instagram, Pinterest and Slideshare.
