Endowments

Endowments.

Endowment products that are available in the U.K. are actually insurance policies which are offered by numerous companies. Many are life insurance policies that can be used to protect the family of the policyholder in the event of an untimely death. The policy is designed to pay a lump sum amount at the time of death or at the time that the policy has expired. In this case, endowments can serve to be a valuable saving program.
For those considering buying endowments, it is important to understand that there are many products to choose from.

The typical, traditional endowment policy is created to provide life insurance coverage while, at the same time, building a savings program. Generally, these policies have target amounts that are designed to meet a particular goal. The lump sum can then be used to pay off mortgages, provide for a regular retirement income, or to finance school fees.
These policies, referred to as a with profits endowment policy in the U.K., offer elements that make them even more attractive.

There are guaranteed target amounts to insure that the goal will be met. These amounts are agreed upon at the start of the contract so that the specified money will be paid out at the time of death or at the maturity date of the policy.

Another popular feature is the assigned transfer clause. This element allows for the policy and the lump sum amount to be transferred to a third party.

These policies have a lot of upside to them. A set amount of money can be realized at a predetermined time, they are transferable, and the profits can be spread out to cover down times. The main disadvantage is that the premiums must be paid on a regular basis.
Endowment mortgage policies are set up to pay an amount into it each month. At the end of the predetermined term length, the home mortgage is guaranteed to be paid off. Basically, it is an investment in stocks and bonds that supply the money to pay the endowment.

There are both advantages and disadvantages to this type of policy. It is certainly a good idea to have a policy that will pay off your mortgage but, since the policy is tied into the stock market, it is a risky investment.

Endowment products can provide many great services to the policyholder but they must be carefully chosen.

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