Selling Endowment Policies

Endowment policies can be fantastic ways to save money for the long term under a structured plan, and to give you a strong return in a tax efficient manner.
Endowment policies are generally for a term of between 10 and 25 years. They are paid into by the policy holder over an agreed period in order to build up a lump sum, which can be used for any purpose once the endowment is ‘cased in’. Endowment policies are typically linked to an interest-only mortgage, with the policy holder paying off the interest owed on the mortgage and the endowment used to pay back the loan itself. Endowment policies very often contain a life assurance element, for example insurance which will cover repayment of the mortgage in the event of the policy holder dying before the end of the term of the endowment policy. Alternatively, an endowment might be linked to life insurance, so that your loved ones are left in a secure financial position should you die before the endowment term is complete. The premium payable is calculated based on the projected growth rate of the fund, the investors’ age and length of term of the endowment policy.

A typical with profits endowment policy usually returns you a profit in one of two ways.
First, by annual bonuses which the insurance company may add to your policy, representing a percentage of the amount of growth made by the endowment fund, which has been built up during the endowment term so far. Of course the amount of return depends on market conditions and the kind of endowment policy you have taken out in terms of risk, but they very often pay out a reasonable rate of return.  Second, the life assurance part of the contract may contain provision for a terminal bonus, a separate amount of money which is added when the policy matures and is cashed in. This may depend on how long you have held the policy for, and the amounts paid in, as well as market conditions and the growth of the fund.

Another type of endowment policy is the unit-linked endowment.
This offers a choice for the endowment policy investor from a range of the unit-linked funds held by the insurance company, from stocks and shares to all types of equity and profit funds. Of course that means that there is an element of risk, depending on the strength of the stock markets and investments you choose. That said, you are likely to be able to switch your funds to move your money to different types of asset or stock markets in order to ensure continuous growth of your endowment policy.

Endowment policies are subject to extensive regulation.
Nevertheless you should always take careful advice before entering into a policy, to find out whether the type of endowment is right for you, the potential liabilities you could face if you fail to keep up payments and the amounts of growth and bonuses which you can expect to receive. It is always recommended to take independent advice before taking out an endowment policy.