Endowment Insurance is one of many common types of insurance used in the United States and across the world. Although it is considered life insurance, it is usually cashed out before the holder actually dies at a pre-agreed date, or if they meet a requirement, such as a serious illness. Also unlike regular life insurance, which simply results in a payout should the policy holder die, Endowment Insurance is slightly more complex in that it is sometimes linked as part of a savings account and a mortgage; and is paid out with interest when the holder pays off the mortgage. This type of life insurance might make a profit over its term and can also act as a savings plan for retirement. Terms of Endowment insurance often differ from person to person.
More specifically there are several common types of endowment policy. First is “with profits”, which includes regular bonus payments that add on to the guaranteed payout amount. Then there is “Unit Linked”, where the premiums are invested in units and the price is determined by the performance of the fund itself. Thirdly are “Low Cost” endowments that combine with profits and a decreasing term assurance to make sure the capital sum is repaid upon death. There are also various endowments for first time young house buyers.
Maturity dates differ, but common periods include 10, 15 and 20 years, or when an event occurs such as a serious injury or illness. Most endowments can also be paid out early. This is known as surrendering. The actual payout is determined by the issuer of the insurance and depends on several factors, including the length of the policy and how much has been paid in already. It obviously won’t payout as much as it would have at maturity, but policy holder’s often like the surrender clause because it means they can get at least some of their money right away if they fall in to financial trouble.