The insurance business in India isn’t just growing, it is also becoming more sophisticated in terms of product offerings. To help readers keep ahead of developments in this business, Mint features a Q&A on insurance every Monday.

How should one decide which fund option to go for in case of a unit-linked insurance plan?

The choice of fund option depends entirely on one’s risk appetite and financial goal. Most insurers offer fund options such as growth, balanced and secure funds. As these names suggest, you can decide which fund option will suit you the best over the long-term because insurance is a long-term investment.

In case there is any doubt in your mind, you should consult your financial adviser, who will be able to work with you in order to determine your risk profile.

When is the choice of an investment fund made?

The policyholder is required to specify the fund option while proposing a unit-linked life insurance policy (Ulip). The choice of investment fund has to be indicated in the proposal form.

However, one of the many advantages of an Ulip plan over other investments is that once the policy is taken, you can switch between the various fund options offered under the policy. This means that your investment strategy can vary with your needs and with your appetite for risk.

Can the choice of investment fund be changed?

Yes, the policyholder has the flexibility to switch between fund options during the course of the policy.

Is it possible to invest in all the available investment funds?

Yes. The policyholder can specify the proportion in which contributions are to be appropriated among the various fund options.

In most cases, the minimum investment in each fund should be 10%.

Is there any limit on the number of switches in a policy year?

Depending on the policy type, insurance companies offer typically between two and six free switches in a policy year.

After availing of the free switches, one can also opt for paid switches, which again differs from company to company. This amount of flexibility is unmatched by almost all other investment products currently available in India.

Are charges for unit-linked products clearly displayed on insurance companies’ websites/sales literature?

All costs for unit-linked products are stated explicitly upfront in the policy documents, websites as well as product brochures.

Readers are welcome to write in with their queries to askmint@livemint.com. The questions will be answered by senior executives from leading insurance firms.

This week’s expert is Bert Paterson, managing director, Aviva Life Insurance Co. India Pvt. Ltd