Should You Sell Your Endowment Policy?

Should You Sell Your Endowment Policy?
by Suzanne Ames

Where and who do you recommend selling an endowment policy to other than the company to whom I have it with? Would I get more value from the surrender value choosing this option?

Answer

The market for second-hand endowments has grown considerably as a result of changing lifestyles and disillusionment over poor returns. Endowment policyholders have always had the option of surrendering their policy to the life assurance firm that issued it if they do not wish to hold the policy to the end of its term.

One alternative is to make the policy "paid-up" - this means you make no more contributions to the policy but leave it to maturity with the contributions you have already made.

However, if you have a with-profits endowment policy you have further options as well in the second-hand market. A number of firms offer facilities where you may sell your policy or auction it.

Why would you do this? Quite simply, because, in many cases, you may be able to get a better return than the surrender value quoted by your life assurer. Unfortunately, there is currently no market for unit-linked policies.

Of course, there is no guarantee that you will receive more for your policy by selling it rather than accepting the surrender value but uplifts of 5-15% depending on the size of policy and the length of time to maturity have been achieved.

Do remember, however, that if you do decide to dispose of your endowment policy you will also be saying goodbye to the life insurance element as well. If you still require the life cover, you will need to replace this.

So, why would anyone want to buy a second-hand endowment policy? Buyers are hoping that the growth in their 'investment' will come in the form of the terminal bonus. This is an amount paid by the life company at the end of the term. It is not guaranteed, but is designed to reflect the performance of the underlying assets within the investment since inception.

Some life companies command higher prices than others, mainly due to their record of bonus payments. At the time of writing, Scottish Amicable, Scottish Provident, Norwich Union and Clerical Medical policies are all viewed attractively in the open market. Policies that are at least £5,000 in value and have at least five years away from the end date are also most desirable.

In order to get a quote for the second-hand value of your policy, you will need to go through an intermediary such as a independent financial adviser.