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periodic payments made for the insurance

periodic payments made for the insurance

periodic payments made for the insurance

Hello dear  readers. Welcome to Solsarin website. In this article we check out periodic payments made for the insurance. Thank you for choosing Solsiran.

periodic payments made for the insurance
periodic payments made for the insurance

What is a Periodic Payment Settlement?

A periodic payment plan is a claim settlement arrangement to compensate for personal injury. Such an arrangement may include an initial “up-front” cash payment plus a schedule of future benefits designed to meet future financial needs or objectives.

Should you Consider a Periodic Payment Settlement?

Should you Consider a Periodic Payment Settlement?

A periodic payment settlement offers the following significant advantages over a lump sum settlement:


Pursuant to I.R.C. 104 (a) (2) of the Internal Revenue Code of 1986, as amended, all payments are “tax-free”. The Code allows for the tax-free accrual of interest on the sum of money used to fund your periodic payments. As a result, you receive greater benefits than would otherwise be available to you had you chosen to invest the money yourself.


Unlike a lump sum settlement, a periodic payment settlement will provide guaranteed benefits at specified payment dates to assure you of financial security.


A periodic payment settlement can be designed to meet your needs. You may wish to provide for future education expenses, supplement a retirement fund, or simply provide for financial security. The plan can be “tailor-made” to meet your objectives.


Benefits will not be affected by changes in the financial marketplace or the economy and will provide a secure source of funds in the future.


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What Is a Periodic Payment Plan?

The term periodic payment plan refers to an investment plan where an individual makes small payments over time in order to invest in mutual fund shares. These plans involve making contributions of a small, fixed sum over a period of time.

People who invest in periodic payment plans actually own an interest in the plan’s trust—not the shares of the fund. Periodic payment plans are often sold to military personnel but don’t provide these investors with any special benefits.

Periodic payment plans are contracts that allow certain investors a chance to invest in mutual funds at a much lower price—without having to meet minimum investment thresholds. These plans are also called contractual plans or systematic investment plans (SIPs).

As noted above, these plans are generally offered to military personnel. They are able to contribute a small, fixed sum over a period of usually 10, 15, or 25 years. In exchange for these payments, the investor owns an interest in a plan trust—which invests in a mutual fund—rather than the shares themselves. The trust invests in a mutual fund. Most plans allow an investor to start a plan for a modest sum of money, such as $50 per month.1 Those who take part in these plans receive periodic payment plan certificates.

The plan trust’s sponsor makes money by charging a creation and sales charge, which most investors know as a front-end load. This sales charge can be as high as 50% of the first 12 months’ worth of payments. This can make a periodic payment plan a potentially expensive investment option, especially for those who do not remain invested for the full length of the plan.1

Periodic payment plan investors

Periodic payment plan investors may also pay service fees to the plan’s custodian. This entity is responsible for safekeeping the plan’s assets and to maintain its records. Some plans also require investors to pay a custodian fee—a monthly fee to process each payment under the plan. Other fees may include:

  • Annual account fees
  • Completed plan fees
  • Termination fees
  • Inactive account fees

Special Considerations

Investors may be able to get a better deal by purchasing mutual fund shares directly. While the low required monthly contribution may be a selling point of a periodic payment plan, some brokerage companies, whose fees may be lower than that of a periodic payment plan, often allow investors to make small monthly investments and avoid large minimum investments if they establish automatic deposits.

periodic payments made for the insurance
periodic payments made for the insurance

What Is a Periodic Payment Plan Certificate?

A periodic payment plan certificate is proof of an ownership interest in a mutual fund that allows its investors to build up a stake by making small regular payments.

 There are now many other options for investors with modest means to invest in mutual funds, exchange-traded funds, or individual stocks regularly.

  • Periodic payment plans make investing easy by permitting small regular payments into a fund trust.
  • The periodic payment plan certificate is proof of ownership of that investment.
  • There are a number of other ways for a person on a modest budget to automatically direct a portion of savings into a mutual fund or ETF.

Understanding the Periodic Payment Plan Certificate

Investors in mutual funds typically buy a number of shares. However, online brokerages make the process easier by allowing fractional share purchases. For example, an investor could automatically invest $100 per month in a mutual fund. Since fund prices fluctuate in the market, that might be 3.1 shares one month and 3.4 shares the next month.

The periodic payment plan certificate is another variety of investment. In this case, the investors do not actually own shares of the mutual fund. Instead, they have an ownership claim on a fractional interest in the plan trust.

Participants typically invest in the plans by making regular payments of fixed sums over a period that ranges from 10 to 25 years.

The Securities and Exchange Commission (SEC) regulates investment companies that sell periodic payment plan certificates through Section 27 of the Investment Company Act of 1940.

periodic payments made for the insurance
periodic payments made for the insurance

Advantages and Disadvantages of Periodic Payment Plan Certificates

Periodic payment plans have a low barrier of entry, making them an affordable option even for those with modest investing budgets.

The downside is that they usually involve fairly steep fees, which are typically front-loaded, meaning they are due in large part during the first year after an account is opened. The SEC estimates that these fees can eat up half of a $50 monthly investment for the first year of a periodic payment plan. 1

Because of these hefty fees, investors may be better off buying shares in a mutual fund or ETF directly.

Marketed to the Military

This law regulates and monitors the sale and marketing of securities, life insurance products, and other financial vehicles on military bases. The act made it illegal to sell periodic payment plan certificates to military personnel and banned their sale on military bases. The act did not invalidate existing certificates held by military personnel.

Some Alternatives to Periodic Payment Plan Certificates

An investor with a modest monthly sum to invest now has many other options with low fees.

  • Investors can now buy fractional shares of stock, mutual funds, or ETFs through discount brokerages including Robinhood Financial, Fidelity, and Charles Schwab. For example, an investor who couldn’t afford a single share of Amazon at its current price of $3,000-plus could buy a fractional slice of a share through an online brokerage.
  • Online brokers also allow account holders to create periodic investment programs for themselves.

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