Endowment

An endowment is a policy that combines a saving plan with life insurance.

The endowment policy was originally created in the late 18th century to provide life assurance primarily for merchants. Surplus funds accumulated by the life assurance companies were later distributed to surviving endowment policyholders in the form of bonuses, which were added to the original sum assured.

The modern endowment policy is a life assurance contract between an insurance company and a policyholder for a fixed term. Endowment policies were very popular in the 1980s to repay the capital-sum on an interest only mortgage. The endowment policy is also used to pay a lump sum when the policy matures.

With-profits endowment

A with-profits endowment policy is an investment vehicle designed to provide savers with an exposure to a variety of financial investments although at lower risk. With-profit funds invest in property, equities, shares, gilts and fixed interest return investments. These returns are smoothed to reduce the volatility you would see with direct equity investments. A with-profits endowment policy increases in value through annual bonuses paid throughout its term. When the endowment policy ends a terminal bonus may be added to further increase the value.

If you have an endowment policy that you no longer need or want, or if you need to raise cash quickly click here.

Endowment surrender

Endowment surrender is the term used if you wish to cash in your endowment before it matures by surrendering it back to the Life Company that issued it. However, the Life Company will often give you a value which is generally less than you could get from selling it.

A far better solution if you have decided to cash in could be to sell your endowment policy to a third party such as aap, avoiding the hefty penalties you could incurr by surrendering your endowment. When you sell your endowment you could get up to 35% more than the endowment surrender value of your policy. Find out more about selling your endowment.