What Is Endowment Life Insurance?

By Lisa Olsen Posted in Life Insurance News

An endowment policy is a type of life insurance designed to pay out a lump sum after a predetermined term or if the policy holder dies early (before the age of endowment). This type of policy can be an excellent investment and it can provide some level of financial security if you reach endowment age which is usually 95+. However, some endowment life insurance policies will mature long before the age of 95 and can be accessed without penalty.

Types Of Endowments

There are several different types of endowment policies including; low cost endowments, full endowments, unit linked endowments, traded endowments, modified endowments and traditional endowments. Low cost endowments (LCE) uses an estimated rate of growth to hit a target amount to be paid out upon death or endowment age. Full endowments is a type of with-profits endowment that has a basic sum equal to the full benefit at the start of the policy.

Unit-linked endowments are more of an investment where the investment money for the policy is used in a general investment fund. Traded endowments are traditional with -profit endowments that have been traded or sold to a new owner. Modified endowments were created in response to traditional endowment policies being used as tax shelters. This type of policy is subject to more stringent tax regulations.

The Benefits

People who are interested in purchasing endowment life insurance are typically more interested in the investment value of this type of policy then the actual death benefit. Essentially this serves more as an investment purchase than “life insurance.” However, its primary function is to serve as a life insurance policy it is not necessarily used in this capacity.

Endowment life insurance policies are ideal for someone with sizable capital to purchase a policy outright. This would not be an ideal investment for someone who did not have a lot of liquid capital because the money would be tied up for some time.

Related posts:

  1. What Are Modified Endowments for Low Cost Life Insurance?
  2. What Are Traded Endowments For Low Cost Life Insurance?
  3. What Are Full Endowments For Low Cost Life Insurance?
  4. What Are Traditional Endowments For Low Cost Life Insurance?
  5. What Are Unit Linked Endowments For Low Cost Life Insurance?

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