What is an endowment policy?
A traditional with-profits endowment policy is a regular savings policy, combining life cover and investment with guarantees that a minimum amount, the sum assured, will be paid after a specified number of years at the maturity date.
The premiums are invested in a with-profits life fund to achieve steady returns for policyholders. Normally the fund declares an annual reversionary bonus, which cannot be taken away after it has been awarded. In this way the guarantee of the minimum policy maturity value builds up year by year, consisting of the basic sum assured and the total of annual bonuses awarded.
A terminal bonus is normally added when the policy matures. However, it should be remembered that investment returns cannot be guaranteed and that future life fund profits can go down as well as up.
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Selling Endowment Policies . Mortgage Loans
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