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Endowment Life Insurance PolicyWhat is an Endowment Life Insurance Policy?An endowment policy is a type of life insurance contract designed to pay a lump sum after a specified term on maturity, be it 10, 15, 20 or more years, or on earlier death. Like other insurances they can also pay out in the case of critical illnesses but check with your insurance provider because not all of them do. It depends on your agreement. An endowment life insurance policy are basically a modified life insurance where part of the premium goes to build up a cash value fund. Because of this building up of cash value, the premiums are bound to be higher even if compared to a normal life insurance policy of the same value. Apart from paying out when maturity term is reached, there are also conditions where you can get a payout when you reach a certain age say 60 or 70 years of age.. An Endowments Life Insurance Policy can be cashed in early (called 'surrendering') and the holder then receives the surrender value which is determined by the insurance provider depending on factors such as length of time it has been running for and the amount of cash value built up over the years.. Endowments Life Insurance companies have been criticised, in the past, for offering low surrender values and for being inflexible if clients becomes incapable of meeting the premiums. Changes of circumstances caused by redundancies for example, are generally not taken into account by the company providing an endowment life insurance policy. Some do but most don't. Policies are traditionally unit linked and comes with the following types depending on the insurance company. Traditional With Profits Endowments There is an amount guaranteed to be paid out called the sum assured and this can be increased on the basis of investment performance through addition of periodic bonuses paid out periodically say every year or at the end of the policy. Unit-linked endowment These are investments where the premiums are invested in units like an insurance fund. Units are encashed to cover the cost of the life assurance. Policyholders are given the ability to choose which funds their premiums are invested in and in what proportion... etc. Full endowments A full endowment life insurance policy is a with-profits endowment life insurance policy where the total sum assured matched the death benefit the holder agreed upon at the start. Accounting for any growth (if any) the final payout should be much higher than the sum assured. Low cost endowment A low cost endowment life insurance policy is a combination of: (a) an endowment where an estimated future growth rate will meet a target amount and (b) a decreasing life insurance portion to ensure that the target amount will be paid out (as a minimum) in the event of a death or a critical illness. |
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