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What Is a Systematic Withdrawal Plan (SWP)?

  12/14/22 2:18 PM

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A Systematic Withdrawal Plan (SWP) is a facility that allows you as a policyholder to withdraw funds from an existing policy at predetermined intervals. With SWP you can  Plan your Spends as it allows you to withdraw money for your spends/goals/needs systematically. 

You may have heard of Systematic Withdrawal Plan with respect to a mutual fund’s investment. However, when it comes to Life Insurance, SWP is a concept of Unit Linked Insurance Plan investment. Under this, you can withdraw money in instalments, unlike a lump sum withdrawal. You can use these withdrawals as per your need or even direct them into a preferred savings bank account to temporarily deal with market fluctuations.

The SWP feature allows you to customize the cash flow from your ULIP as per your requirement. You can either choose to take out the capital gains or even withdraw a fixed amount at a frequency of your preference. Apart from the sum you withdraw, the rest of the money stays invested in the ULIP, garnering effective returns.

Key Features & Benefits of Systematic Withdrawal Plan

With the help of this feature, you get an opportunity to withdraw cash as per your financial needs. The key benefits of SWPs include:

  • Helps You as a Secondary Income - The SWP becomes a reliable source of fixed income during your retirement years. You can use this money to fulfil your retirement expenses, such as medical costs, travel costs, etc. Moreover, even during your working years, you can use the SWP advantage to cover costs such as your child’s education, home loans, EMIs, etc.
  • Assists You in Achieving Your Financial Goals: SWP can also help you achieve your financial goals more easily. If your goal requires to be funded in a phased manner, the SWP feature in a ULIP can be highly beneficial. It will provide you with the funds at the right time, enabling you to achieve your objective and not delay them because of a cash crunch. For instance, if you wish to own a car for your family, you can pay the car EMIs with SWP from your ULIP scheme.
  • Helps You in Saving Tax: The withdrawals you make under this feature are considered as redemptions and hence, are not subject to tax deductions at source (TDS). This implies that you owe tax only on the income component and not on the capital portion of your withdrawals. You have the option to set up your withdrawals such that you only take out the appreciation on the investment amount. This will mean that your capital remains invested in the ULIP scheme while you enjoy ULIP taxation benefits and gains at regular intervals.


Swati Tumar - Travel & Finance Writer

Swati is a Writer in the day and an illlustrator at night. Among her interests, she is quite fond of art and all things creative. She often indulges herself in creating doodles, illustrations, and other forms of content. She identifies herself as an avid traveler and shameless foodie.

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