Endowment Policies and Life Insurance Policies
An 'endowment policy' is a concept of 'life insurance' and is a contract that is created to pay an amount after a certain time when it has 'matured' or by an earlier death otherwise. Times that might be involved could be for 10, 15 or 20 years up to a certain amount of time. Furthermore, it might be possible to have a payment in the situation of a dangerous illness. The policies may be 'traditional with-profits' or also 'unit-linked'. Because endowments may be shortened in regards to the paying period and the date earlier, they could cost much more than 'life' or 'universal life' insurance - it should also be noted that endowments are paid whether the insured lives or dies. Endowments are types of policy in which the cash value will build up and at a certain age will be equal to the death benefit and is know as the 'endowment age'.
Life insurance can be cashed in early (or 'surrendered') and the holder then receives the surrender value which is determined by the insurance company depending on how long the policy has been running and how much has been paid in to it. Regarding traditional with profit endowments, there is a certain agreed amount that can be paid and also increased via investment performance through bonuses. Endowments have historically been looked negatively upon in the sense that they may have a low surrender amount and also not offer a large amount of choice for when the customer would be unable to make payments. This is apparently at variance with mortgages where there may not need to be such strictness. Looking next at unit-linked endowments, this is a situation where the money is paid into various units for a unitised insurance fund. The units are 'encased' to be able to provide for the life assurance cost.
Moreover, it might be possible for policyholders to have a choice where their funds are paid into and by what amount. A 'full endowment' is the situation of a 'with-profits' endowment whereby the initial sum that is assured is similar to the death amount from the beginning of the policy and with growth the final amount to be paid will be higher than the assured sum. Regarding low cost endowments, this is where there is a grouping of an endowment whereby a future growth amount will reach a target amount and additionally a lowering life insurance amount so that the final amount will be paid as a minimum total should death happen or critical illness is found. The main reason for a low cost endowment has been for the purpose of endowment mortgages to pay interest off with maturity or for earlier death.