The current market scenario is leaving a great impact and has changed many things in our lives. During the last bear market, the impact of market weakness was limited to stock market and hence the worst affected were those who took a bet on stocks. In the current edition of market weakness, the number of affected by equity are many more, thanks to the popularity of unit-linked plans.

Technically, insurance sector should have little to worry about as investors in the policy are long term investors. However, due to the wrong selling strategy of investors and advisors, insurance, in recent times, particularly the ULIPs, have been sold on the basis of shorter tenure. In fact, many insurance companies even launched policies with shorter tenure of as little as 3 years on the premise that policyholders had shrunk their commitment towards their premiums.

While one could get away with shorter tenures during 2003-07, it may not be the case for the coming year and hence, those who signed up for ULIPs may have to hold on to their policies for more than three years. Besides staying invested, ULIP policyholders can also make a better use of their investment through some changes in their investment strategies. Here are some tips for managing your existing ULIPs:

Switch to monthly from annual: if you are an investor with long term focus for your insurance policy, continue with your equity allocation. However, monthly mode for premium may work better than annual premium mode as stock market has been volatile. In the case of monthly premium, investor gets to enjoy the benefits of volatility like SIP (systematic investment plan). The good thing with ULIP is that there is plenty of flexibility with premium payment and investor can change from one mode to another at any time.

Increase allocation for debt: ULIP, often, is associated with equity though in reality, every insurance company offers at least 4-5 investment options for the premium. As a result, investors who signed up for ULIP more than 4-5 years can look at the option of reducing equity exposure for the next one year. The logic is simple. When these investors signed up for ULIP, the stock market was closer to the present level or slightly lower than the current level. If you have made some gains from your ULIP, protection of profits can be an option and hence reduce your equity exposure. The ratio between equity and debt can be according to your comfort. Those with medium risk appetite can look at 30-40% in favour of debt. If you can't decide for yourself, look at the option of balanced funds which allocate up to 35-40% in favour of debt. You can revert to 100% equity once the stock market stabilises.

Now the question is should everyone review their ULIP premium strategy? The answer is yes if you are not a long term investor. On the other hand, if ULIP is an option to build corpus for your medium term needs or children's education with a tenure of over 10 years, you need not worry much about the market volatility. In fact, insurance companies themselves do value picking with their funds as they don't have the pressures of redemptions when compared with mutual funds. That is also the reason why insurance companies managed to post better returns with their ULIPs during the market meltdown.

Hence although in this current market situation it seems more preferable to go in for ULIP's and those who have existing policies to review them.