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Hello, in this video we will be looking at what is an endowment policy?
An endowment plan is a type of life insurance policy. As well as acting as a life insurance policy, it is also an investment fund. These policies are designed to pay out in one of two scenarios:
When the policyholder dies.
Or, when the policy matures/reaches the end of the policy term
There is a range of different types of endowment policy on the market. These include non-profit policies, with profit policies,unit-linked cover, and mortgage endowment policies.
When the policy matures or comes to an end, you can access the maturity value. This is the amount you have accrued over the duration of the policy. This can vary depending on how well your investment performs.
The maturity value will either be estimated or guaranteed, depending on your policy terms. Typically, the maturity time will be ten, fifteen, or twenty years. They often have an age limit, and some will give a payout in the event of critical illness.
There are a variety of advantages that come with buying endowment policies. These can include factors such as:
Helping you save finances for the future. This might be useful for supplementing your pension in retirement, for example.
They also come with life cover. This will give your family financial support should you die during the policy term.
And, depending on the features of the policy you choose, you might be able to receive a bonus. This happens if investors are successful when making their investments.
If you want to stop paying for your life insurance endowment, you have two options. You can either cash in the life insurance investment, or sell your endowments to a third party. These third parties are known as traded endowment policy (TEP) companies.
When you sell your life insurance endowment, the buyer then owns it. They are responsible for paying the premiums, and they receive the amount when the endowment life insurance matures.
Selling endowment policies to a third party company is normally better than asking your endowment provider to cancel your plan. The fact is, you are likely to get more for traded endowment policies than surrendered ones.
Generally, people choose to sell their endowments for one of two reasons. Firstly, the growth rate might mean they have not saved as much as they expected. Secondly, if their circumstances have changed they might need to spend the amount saved so far.
Before you choose to sell your endowments, decide what you want to use the money for. Typically, people use the endowments to pay off their mortgage, make investments in stocks, pay off large debts and fees, or even gift it to somebody else.
If you decide to sell your endowments, you next need to make comparisons between potential buyers. Seek guidance before deciding who to sell your investments too.
Some people find that when their endowment policies reach maturity age the profits they get are much lower than expected. You can ask your provider what they expect the policy to pay, and decide whether this is enough.
If you cannot afford the payments anymore, some lenders might let you keep the policy but stop making payments towards it. However, the savings are not paid into your bank until the policy ends. There might also be an impact on life policies too, for example your insurance could be void.

That is the end of this video, but if you would like to read more you can do so on the help and advice website.

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