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Markets Go Up, Markets Go Down—But What About Your ULIP?

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Markets Go Up, Markets Go Down—But What About Your ULIP?
February 27, 2025

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The investment risk of ULIP is borne by the policyholder.

Every individual goes through their own set of highs and lows. Take the example of a sportsperson. There will be times when they may excel in their field. Then, an injury may cause them to take a step back, or they may not be able to perform at their optimal best. However, this journey cannot be judged based on a few bad innings or phase.

Much like a sportsperson’s career, markets also go through highs and lows. But what matters is staying on the pitch—being in the game for the long term. If you have invested in a ULIP, you may have seen your fund value rise and fall. It can feel unsettling, even frustrating. But these movements are normal. Understanding why they happen and how they affect your returns can give you the confidence to stay invested and grow your corpus.

Why markets rise and fall

Financial markets respond to a mix of factors—economic growth, inflation, interest rates, global events, corporate earnings, and investor sentiment. These factors shape whether the market booms or corrects. Let us look at stock market ebbs and flows in detail.

Rising markets: When the economy is strong, companies perform well, and investors feel optimistic. Stock prices go up. If your ULIP has equity exposure, your fund value grows.

Falling markets: Global uncertainties, recessions, or interest rate hikes can trigger a sell-off. This affects equity investments, causing a dip in your ULIP returns.

But here’s the key—markets don’t fall forever. Just like a player regains form after a bad match or a patch, markets recover. And when they do, long-term investors benefit the most.

What happens to ULIP when markets move

A ULIP invests your premium in funds linked to market assets—equities, debt, or a mix of both. How your ULIP reacts to market changes depends on your asset allocation.

If you are in equity funds: You see strong growth in bullish markets but also experience short-term declines in downturns.

If you are in debt funds: These are more stable but still affected by interest rate changes. They provide a cushion during market drops.

If you are in a balanced fund: Your ULIP has both equity and debt, offering a mix of growth and stability. It is rare that both equity and debt will fall at same time. So, when one goes up, the other provides stability.

Importantly, your ULIP returns aren’t locked at one value. They fluctuate based on market conditions, which impact the underlying assets. But the longer you stay invested, the more likely you are to benefit from growth cycles.

How market swings affect ULIP returns

When markets are rising, the Net Asset Value (NAV) of your ULIP fund increases. You see your corpus growing. This is when it feels great to be an investor. Investors who invested in 2013-14 have experienced this for extended period of years. In fact, if your investments are during a rising market phase, you will enjoy the highs.

When markets fall, the NAV dips. Periods such as 2018, or Covid 2020 crash have showed what happens when markets fall sharply in a quick period of time. In times like these, you may worry about losing money. But here’s the catch—this is only a loss on paper unless you withdraw. If you stay invested, the units you hold remain the same. You only realise a loss if you exit during a downturn.

In fact, market falls present an opportunity. Your regular ULIP premium buys more units when prices are low. This is called rupee-cost averaging. Later, when markets recover, these units along with your older units gain value—boosting your overall long-term wealth.

What can you do to protect, grow your corpus

Market ups and downs are inevitable, but your ULIP doesn’t have to suffer. Here are 5 things to do. 

  1. Stay on the ground longer
    Just like you don’t leave a game after the first few minutes or a bad run, don’t exit your ULIP during short-term market corrections. Wealth creation happens over years, not months.
  2. Use switch hits wisely
    Most ULIPs allow free fund switches. If markets look uncertain, you can shift some funds to debt for stability. When markets recover, move back to equity to capture growth.
  3. Make rupee-cost averaging work in your favour
    When you invest through ULIP premiums regularly, you automatically buy units at different prices. This smooths out volatility and reduces the impact of market swings.
  4. Diversify for balance
    A mix of equity and debt ensures that your ULIP can weather market cycles. Pure equity gives high growth, but adding debt stabilises returns. A balanced fund gives both.
  5. Top-up investment at market lows
    If you have extra funds, top up your ULIP when markets dip. Buying low and holding through recovery is a tried-and-tested strategy for building wealth.

Your safety net: insurance advantage

Unlike pure market investments, a ULIP offers both growth and protection. Market dips may impact returns, but your insurance cover remains intact, ensuring financial security for your loved ones. 

Even during downturns, your policy continues to safeguard your future. With time, markets recover, and long-term investors benefit from growth cycles while staying protected.

The game is won over time

Market movements are unpredictable. But history shows that over long periods, markets recover and grow. The key to successful investing in ULIPs is not reacting emotionally to every rise or fall.

Think of it like your favourite sportsperson’s career. There were tough phases, but they stayed at the crease, played with strategy, and built a record-breaking legacy. Your ULIP is the same. Stay invested, stay patient, and let time work in your favour.

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ARN: ED/02/25/21633

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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Unit Linked Insurance products do not offer any liquidity during the first five years of the contract. The policyholders will not be able to surrender/withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of fifth year. 

Unit Linked Life Insurance products are different from the traditional insurance products and are subject to the risk factors. The premium paid in Unit Linked Life Insurance policies are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions.

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