What is endowment life insurance ?
Endowment life insurance policies generally come in more than one form, with profit and without profit. The insurance policy usually has a maturity date when a lump sum of money is paid to the policy holder unless the later has died before that maturity date.
There exist a number of terms for a life endowment insurance policy. You can have a policy over ten, twenty or twenty five years depending on which insurance company or broker you are using. Obviously, the shorter the term the more expensive your life policy premiums are likely to be. Furthermore the premium amounts that are payable monthly are unlikely to change much over the term of the life insurance policy.
More than like the premiums you pay per month will be invested by the insurance company to yield sufficient returns so that the policy can pay you a ‘profit’ at the end of the term or at maturity. Non profit endowment life policies are rarely used nowadays as the insurer would expect a return on investment. After all, why would someone invest in a no profit endowment when there are probably alternative investment opportunities that pay interesting dividends and interest?
The with-profit life policy is therefore intended to give a return on the monthly investment. It is therefore similar to a savings account except in this case the policy will pay the full sum insured if you die before the term of the policy, even if you have not put in the actual amount of the sum assured.
It is clear why some people would prefer an endowment policy. Everybody wants to save and put some money aside but with the cost of living increasing all the time, it is sometimes difficult to find chunks of money to put aside. Paying a monthly affordable premium, getting a life insurance cover and being able to get a profit at the end of the policy sounds like a no brainer, win-win situation.
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