SWP way to make payments to Term Insurance Policy Annually.

POSTED BY Sunil Kumar ON August 17, 2011 2:25 pm COMMENTS (3)

Hi all,

I am having a term insurance policy, wherein I need to pay premium of approx 9K per annum.  However, I am planning to go for Systematic Withdrawal plan(SWP) option with monthly withdrawal, such that the monthly withdrawal will accumulate approximately little more than the premium per annum and the policy amount would be debited from my bank account using ECS way.  Thus, in total, I need not worry about making payment toward term insurance policy annually.

And to add on, I am planning to accumulate the amount(approx 1L) in the following way.
1. Invest 30K in bulk towards MF(company X)
2. Accumulate 35K using MIP’s in 2 different companies (company Y and company Z).

Once I have accumulated 1L, then move the funds to MF SWP’s to get the earnings monthly.

Please let me know your thoughts(pro’s and cons). Curious to know, is there is any other better option?  Note, initially, I thought of making an FD such that the interest earned out of FD annually would directly be fed to the policy.  However, thinking, that such an option might not yield better return like SWP way.  

I hope, I am clear!

Thanks in advance!
Sunil Kumar

3 replies on this article “SWP way to make payments to Term Insurance Policy Annually.”

  1. Abhishek says:

    Hi Sunil,

    SWP is not an investment product. Its a systematic way of withdrawing money. So SWP cannot be compared to a BANK. Keeping it simple, its the opposite of SIP.

    The tax rates will change depending on your holding period and the type of fund u are doing this SWP from.

    Regards,
    Abhishek

  2. Sunil Kumar says:

    Hi Abhishek

    I remember having read that SWP’s returns are better than bank returns. Isn’t it?

    Curious to know, more on the taxation aspect between bank and SWP way. All I know, that one needs to pay tax for the interest earned from bank. How about SWP?

    Thanks
    Sunil Kumar

  3. Abhishek says:

    Hi Sunil,

    I would recommend that you keep things simple. Pay your Term Plan premium from your bank account directly.
    SWPs and SIP and then Again SWP will complicate matters for you and increase paperwork and tax calculations will increase unnecessarily..

    All the best !

    Abhishek

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