An endowment policy is a great choice for people looking for an investment policy that includes life insurance.
But, what is an endowment policy, what are its pros and cons, and is it a good option for you?
Let’s dive in.
An endowment policy is a type of investment with life insurance that you can take out of a life insurance company and some financial institutions in the UK.
An endowment policy in the UK, like a life insurance policy, requires regular monthly payments, called premiums, over a fixed period, which usually stretches between 10 and 25 years. At the end of the term, the insurance company pays out a lump sum to the insured or the beneficiary.
Non-profit endowment policies in the UK have lower premiums and a static payout amount. There are no bonuses with these plans, but they are a great safety net for the family.
With-profit endowment policies, also known as full endowments, guarantee to pay out a certain amount of funds to the beneficiary in certain circumstances. Unlike non-profit policies, full endowments’ payout isn’t static and the maturity benefit at the end of the term is often larger than the sum assured.
In unit-linked endowment policies, the premiums are used to purchase investment funds. The payout sum at the end of the term depends on market performance and return of investment.
This life endowment policy more closely resembles life insurance in that they are tied to the insurer’s death. The insurer pays a lump sum to the beneficiary or family after the death of the insured.
Policy premiums differ depending on age, sex, term, and type of endowment. In most cases, it is more profitable to see a policy to term. In case you cancel it, you automatically forfeit the insurance attached to it.
Selling your endowment policy could potentially be a better option than cancelling.
If you’re looking for a place to sell your endowment insurance policy, you might want to consider the Traded Endowment Policy (TEP) market where you can find good deals. You can get quotes from various traded endowment specialists and then compare which offer works for you.
The endowment policy type will determine its resale, meaning you might be able to sell with-profit or whole-of-life endowments, but not unit-linked endowment policies. The term of the policy may also affect whether it can be sold.
Endowment policies are a great option for people who prefer risk-free investments with an insurance element to them. There are several types, some of which are more profitable than others, but they’re all long-term investments.
Once you figure out what is an endowment policy and how it works, you can make an informed decision about whether or not to take one out.
My name is Marija, and I'm a financial writer at DontDisappointMe. Although finance might not be everyone's cup of tea, my 10+ years of working in one of the biggest banks in my country, and my interest in extensive research on everything finance/investment-related, have made me somewhat of an expert in the field (if I do say so myself). No longer having the passion to work in a corporate setting, I decided that I couldn't let all of this knowledge go to waste so I started writing. And, here I am! Today I try to share my knowledge with my audience in the hopes of making this topic as simple and interesting as possible. In my leisure time, I like spending time with my family and travelling to new locations.