Endowment policy

Endowment policy

An endowment policy is a life assurance contract designed to pay a lump sum after a specified term or on earlier death (some policies also include critical illness as condition of payout).

Policies are typically traditional with-profits or unit-linked (including those with unitised with-profits funds).

Endowments can be cashed in early - known as surrendered - and will then be paid 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. During adverse investment conditions, the encashment value or surrender value may be reduced by a 'Market Value Adjuster' to allow for the need to cash in units at a time when investment conditions are not ideal. This means that the investor would receive the surrender value less the market value adjuster.