Staying Invested In ULIPs Through Market Rise And Falls

IndiaFirst Life
• 01 Aug, 2025

ULIP Performance During Market Rise & Fall

Unit-linked Insurance Plans (ULIPs) are a well-known investment tool that combine the benefits of life insurance and market-linked returns. Their flexibility and potential for long-term wealth creation make them a popular choice for investors. However, many people worry about how their ULIP will perform during market ups and downs.

While one can list down several ways to deal with market fluctuations, perhaps the key points can be encapsulated in one sentence: stay invested for the long term. Let’s explore the effects of the rise and fall of markets on your ULIP and what you can do to keep going ahead.

Why do Markets Rise and Fall?

Financial markets are influenced by several factors. These include:

Economic changes
Interest rates
Geopolitical events
Company performance
Investor sentiment

When the economy performs well, markets tend to rise. They are driven by optimism and better earnings reported by corporations. This is known as a bull market.

On the other hand, markets fall when there’s uncertainty or negative news, such as inflation, rising interest rates, political instability, or global slowdowns. These are bear markets. Here, prices drop, and so does the confidence of the investor.

ULIPs, being market-linked, are naturally affected by both these phases. But rather than fearing this movement, investors should understand how the effects of the rise of the market on ULIP or the fall of the market on ULIP affect their investment journey, and how they can make the most of it.

ULIPs During a Market Rise

When markets are on the upswing, ULIPs generally perform well, especially if the investment is in equity or balanced funds. The effect of the rise of the market on ULIP funds can lead to higher Net Asset Values (NAVs), which can boost your overall fund value.

Here’s how a rising market can impact your ULIP.

Higher Returns

ULIPs invested in equity funds can generate better returns during a bull phase.
Increased Wealth Creation

Staying invested during a market rise allows the power of compounding to work in your favour.
Fund Switching

If your ULIP allows, you can switch between debt and equity to lock in gains during a rising market.

Using a ULIP calculator, you can estimate how much your fund might grow under positive market conditions. It gives you an idea of your projected maturity value based on expected returns.

However, it is important not to chase returns or time the market. ULIPs are long-term instruments, and consistent investing is often more rewarding than reacting to short-term gains.

ULIPs During a Market Fall

A falling market can lead to negative returns in the short term. This is where investor confidence tends to shake. But the effect of the fall of the market on a ULIP does not mean a permanent loss, unless you withdraw at the wrong time.

Here's what to know during a down market.

Temporary Dip in the Value

NAVs may fall, especially for equity-heavy ULIPs, but this is part of the market cycle.
Rupee Cost Averaging

If you are paying premiums regularly, you are buying more units when prices are low. This can lead to long-term gains when the market recovers.
Stay Invested

Exiting during a fall can lock in your losses. Hence, it is important to keep your funds invested.
Switch to Safer Funds

Some investors use the fund switch option to move into debt funds during high volatility. This option can be exercised after a quick but thorough analysis of your portfolio.

Understanding the effect of the fall of the market on a ULIP also helps investors practice patience. You can use a ULIP calculator to plan better by seeing how consistent investing can help cushion the long-term impact of downturns.

How to Encourage ULIP Growth Despite Market Ups and Downs

Market volatility is common, but your ULIP strategy does not have to suffer. Here are ways to encourage growth in your ULIP portfolio, even during uncertain times:

Step 1. Think Long-Term

ULIPs are designed for long-term wealth creation. The lock-in period is five years, but the real benefits emerge over 10–15 years.

Step 2. Stay Consistent

Continue paying premiums regularly. This allows rupee cost averaging, which can reduce the impact of market fluctuations.

Step 3. Use Fund Switching Wisely

ULIPs allow you to switch between funds (equity, debt, balanced) based on market performance or life stage. You can use this option to balance growth and safety.

Step 4. Review and Rebalance

Assess your ULIP’s performance yearly. By rebalancing, you can align the fund with your risk appetite and changing goals.

Step 5. Track with a ULIP Calculator

Regularly use a ULIP calculator to check how your fund can grow and what you should do to steer yourself in the right direction.

Step 6. Enjoy ULIP Tax Benefits^**

Take advantage of ULIP tax benefits under Section 80C (premium deductions) and Section 10(10D) (maturity benefits), to retain more of your returns and increase your savings.

Step 7. Stay Goal-Focused

Let your financial goal guide your investment and not the market noise. Keep your goal in mind, whether it is investing for retirement, a child’s future, or wealth building.

The effects of the rise and fall of the market on ULIP should be viewed as opportunities to stay disciplined. Over time, your patience and planning are likely to be rewarded.

** Tax exemptions are as per applicable tax laws from time to time.

by IndiaFirst Life
Headquartered in Mumbai, IndiaFirst Life Insurance Company Limited (IndiaFirst Life), with a paid-up share capital of INR 754.37 crore, is one of the fastest growing private life insurers in India in terms of New Business IRP in Fiscal 2023. Our key differentiators are our simple, easy-to-understand products that are optimally priced. As of Sept 30, 2023, we offered 30 retail products, 13 group products along with six riders (across retail and group portfolios), along with policies under the PMJJBY scheme, catering to protection, savings, health and retirement needs of our customers, leveraging multiple distribution capabilities and augmenting various investment options. In all propositions under the categories of Participating Plans, Non-Participating Savings Plans, Non-Participating Protection Plans, Unit Linked Insurance Plans, Group Protection Plans, Corporate Funds Plans, Riders & PMJJBY form a complete suite of offerings that help our customers prepare for the certainties of life. Our products are easy to understand and optimally priced with a developed comprehensive risk management framework/policy.