Endowment life insurance policies
In these policies the sum insured is payable either at maturity of the policy on a fixed date, or if the life insured dies earlier. The standard non profit endowment insurance provides a level guaranteed sum insured on death or maturity. Because a payout is guaranteed, assuming premiums continue to be paid, then these are substantive policies which can be used as security for loans either from the life office or another lender.
Premiums are kept level during the term of the policy and are usually higher than for whole life policies because the maturity date of the endowment policy is usually shorter than the expected life expectancy date. The shorter the period of the endowment policy the higher the premium will be for the given sum insured because the premium needs to be sufficient to support the pay out at the maturity date.
With the exception of flexidowment policies, the types of endowment listed below are only really suitable investments if investors do not want their money until the maturity ate. Endowment polices usually provide their best yield if allowed to run to maturity. This is partly because surrender values on life insurance policies are generally low and in the very first year can be zero. The terminal bonus is only added when a death claim is made if the policy matures. These terminal bonuses can form a large part of the total claim value.
Non profit endowments
These are very basic policies, with level premiums, a guaranteed fixed sum payable on death or maturity. Because these policies are less sophisticated they are less attractive to consumers than they used to be.
With profit endowments
For these policies the amount payable on death or maturity is the guaranteed sum insured plus bonuses. If the endowment policy runs to maturity it will have had more time to accumulate bonuses and the payout will be higher.
As the final payout includes bonuses, it is not possible to forecast the exact amount that will be paid, as future bonus can not be precisely predicted. Premiums are higher than for non profit policies to reflect the added benefits of the with profit policy.
next -
Low Cost Endowments