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Endowment Shortfall Problems

The endowment shortfall is an issue that has effected hundreds of thousands of people across the UK. A conventional endowment policy is a life insurance contract which will pay a predetermined lump sum following the death of the life insured. An endowment policy is also an investment policy as part of the premium is paid into one of the insurer's with profit funds. As the policy progresses a value is accumulated and is supposed to meet a target at the end of the policy, upon assumed growth rates. At this point it matures and pays out a final valuation to the consumer.
The sum insured is split into two elements, the guaranteed sum assured which is an amount that should be guaranteed to be paid out at the end of the policy and the mortgage sum assured which is the guaranteed sum assured combined with the total life cover in place.
Bonuses are paid each year called reversionary bonuses and these accumulate and are paid at maturity. The insurer will announce at what rates these bonuses are applied at each year. There is also another possible bonus applied to the policy upon a claim or at maturity which is called the terminal bonus. Again these rates are announced by the insurer each year and are not guaranteed to be anything at all.
As previously mentioned the policy is an investment and has a surrender value which is made up of the bonuses, premiums paid and how long the policy has been in force.
It is possible that when upon any claim or early surrender that the policy can be penalised due to poor market conditions. This means that the surrender value will have a Market Value Reduction or Adjustment made to it. This is applied to protect other policies that remain invested in the with profits fund that these policies are invested in.
The endowment shortfall has been a result of the poor performance of the insurers' with profits funds. Bonuses have also been low or non existent and whereby upon sale the policies were made out to hit or even exceed at target at the end of the policy they have been falling well short.
The main concern is that the possibility that there could be a shortfall was never made clear at the beginning of the policy by which ever company or agent that was responsible for selling the product.
Throughout the term a consumer can ask for a projection from that point until the policy is due to mature, this is called an estimated maturity value. This will show upon 3 different assumed growth rates what the policy will likely pay out at maturity. This can show a shortfall from early on and people that have been actively watching their policy have been able to take action but unfortunately many people don't find out until a lot later or even at the end and this can be a very problematic surprise!
Due to the backlash that has come from the endowment shortfall problem insurers have seen consumers complain in vast numbers as have financial advisers and any other people or companies responsible for selling these contracts. Companies have been set up to deal with mis-selling complaints on behalf of consumers and also there are a range of market maker companies who are willing to buy endowment policies from consumers for a competitive price so they can keep the policies as collective short term investments. This is a very popular choice for people that are not willing to see the endowment policy through to maturity only to be faced with a huge endowment shortfall. It is at the very least a way of cutting their losses.
Steven D Wright worked for many years in the offices of one of the UK's largest insurance companies. His websites on Life Insurance Questions and Life Term Insurance Policy explain in straight forward language the intricacies of the life insurance world.
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What is Endowment Insurance?

In Life Insurance, by Dan McGill, 1967 Edition, we read, "from the standpoint of structure, it may be said that an endowment policy is a combination of pure or level term insurance and a pure endowment. The same description may be applied to a whole life policy, which is simply a combination of term insurance for a period extending to age one hundred and a pure endowment for the same term."
Barron's Dictionary of Insurance Terms by Harry W. Rubin, third edition, 1991 defines PURE ENDOWMENT as "Life insurance policy under which its face value is payable only if the insured survives to the end of the stated endowment period."
The Handbook of Insurance by Clyde J. Crobough, 1931, speaks of the attributes of endowment insurance: "Some of the special merits of the endowment policy may be summarized briefly: 1. Is a method of compulsory saving. 2. Combines protection and investment. 3. Helps to create funds for special objectives which the policyholder may use."
Endowment life insurance policies have been rarely used in the last ten years. Prior to this, they were popular as a savings mechanism at many life insurance companies. Today, annuities and or universal life have replaced endowments as a popular concept. However currently, endowment life insurance policies seem to be making a comeback. More and more insurers have been offering these policies to satisfy various life insurance and income tax needs. The advantage of an endowment life insurance policy over a tax-deferred annuity is that upon passing to the beneficiary, income tax on the interest earned will have to be paid on the annuity but not on endowment life insurance policy.
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Dale M. Krause is a National Medicaid Crisis Planning Specialist with Krause Financial Services, Inc. Mr. Krause’s educational credentials include a B.S. degree from the University of Wisconsin-Stevens Point, Wisconsin; a J.D. degree from Thomas Cooley Law School, of Lansing, Michigan; and, an LL.M. in Taxation from DePaul College of Law, of Chicago, Illinois.
Mr. Krause is also a member of the Wisconsin and Michigan Bars, National Academy of Elder Law Attorneys, Inc., Coalition of Wisconsin Aging Groups, Institute of Elder Planning Studies, International Association For Financial Planning, The Financial Planning Association, Society of Financial Service Professionals, Fidelity Advisor Council, and is a licensed insurance agent and stockbroker. Mr. Krause is a regular speaker at continuing legal education forums throughout the United States. Dale M. Krause, J.D., LL.M. KRAUSE FINANCIAL SERVICES 1120 Red Wing Trail, De Pere, WI 54115 Telephone: (866) 605-7437 Fax: (866) 605-7438 E-mail: Website: []
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Endowment Policy - Is Endowment Policy Indeed A Financial Protection?

Endowment policy is an insurance plan that is structured to pay a lump sum once the policy reaches maturity, thus it is financial protection for policy holder and the relatives of his. The payment of the policy may vary depending on the term of the policy itself in that if the term vary in terms of years to maturity you will very well be certain the payment will differ. Now the issue with endowment policy is that the coverage may also restrict payout based on the cause of death, illness or accidents that are not known as at the policy is entered into. There are different formats that determine the payout of the policy for cashing in on the policy like considering the time the coverage has been in force as well as the amount of cash that has been paid into the policy to the date payment is effected or requested.
The essence of any endowment policy like I said is to provide financial protection to the beneficiary once the contract reaches maturity. The pay is usually sum assured which is paid at the maturity of the policy and depending on the performance of the policy, there might be some additional benefit provided the policy performed well. In essence, endowment policy really makes you an assured man of better future in case anything contrary happens. Now endowment life policy is an insurance plan as well which includes provisions for early payout should the assured party die before the contract lapses. There are some certain conditions that might prevent the insured party from being deprived of his benefit like in the case of certain death that are disallowed, such insured party will be prevented a payout on the policy. Take for example, the insured commits suicide or due to medical condition that was not disclosed during the signing of the policy, if it is proven that the beneficiary is responsible for the death of the insured, then he will not be paid on the proceed of the policy. It will be wise to protect yourself financially by going to endowment policy center for detailed tips there
kaz rel is an endowment life insurance policy enthusiast that enjoys sharing quality contents with others. He has many articles at his blog at endowment life policy HERE
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Endowment Insurance Explained

Similar to Term life insurance, Endowment insurance is also designed to cover the insured person for a specific period of time, however, that's what the similarities end. Endowment is more similar to Whole Life insurance except that an Endowment policy matures faster than Whole Life does.
An Endowment policy lasts for a specific period of time, for example, a 20 Year Endowment or an Endowment at 60 years. All that this means is that the policy will be paid off in that time frame. In a 20-year Endowment all of your premiums would be paid off in 20 years. In an endowment at 60 you only pay life insurance premiums until you're 60 years old, at which time your policy would be paid up in full. This makes Endowment much more expensive than regular Whole life insurance because you're taking an entire lifetime of premiums and compacting them into a short period of time. The shorter the period, the higher your premiums will be.
Endowment policies build cash value much faster than Whole Life policies do because you're paying your premiums out in a shorter period of time. During the period of coverage the insurance company will pay the beneficiary of the policy the face value in the event of the death of the person insured. If that person does not die during the specified period of the Endowment, then the owner of the policy will receive the face value when the policy reaches maturity. The cash value and face value will both equal the same amount when the policy matures.
The main purpose of owning an Endowment policy is so you can acquire a rapid buildup of funds over a short period of time. These funds can be used for any purpose needed. Endowment policies are not nearly as popular as they used to be.
Joe Stewart Is A Webmaster And Former Life And Health Insurance Agent. He's Made Understanding Life Insurance Easy For Others. You Can Get Free Life Insurance Quotes At His Website or by clicking on Endowment Life Insurance
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An Endowment Life Insurance Policy Is a Term Life Policy With a Cash Back Feature

When you are looking for a good life insurance plan and whole life is not an option you might consider an endowment life insurance policy. An endowment life insurance policy is a term life policy where you are insured for a set period of time. If you should die during the period you are insured, your beneficiaries will get the proceeds. However, when you are searching for term life policies you will find that this type of insurance policy has and added benefit. It accumulates a cash payout over the years.
Therefore, if you do not die within the time you are insured you will be able to take out the money on its maturity date. Traditionally these types of policies have been taken out to provide funds for college or anything that a family may want money for at a future date. How much the cash value builds at any given time depends largely on how well the insurance company is doing with their investments. Endowments also provide cash surrender value if the insured cashes out before the maturity date. Though it is not recommended to use the endowment in this way, it can cushion a disastrous financial setback.
There are different types of endowments with different levels of flexibility for the insured. Full endowment policies will provide a cash surrender value equal to the death benefit. A unit-linked endowment often allows the insured to decide which funds their policy will invest in and how much will be invested. Traded endowments are endowments that have been sold to a new insured when the former policyholder has surrendered the policy; yet, there is still potential for growth and cash value accumulating within the policy. Finally, low-cost endowments are usually purchased to pay off the interest portions of mortgages, if the insured does not die beforehand.
Generally speaking when you compare term life insurance rates you are going to find that this type of term insurance is more expensive. The reason of course is because the typical term life insurance policy does not have an accumulated cash value. Term insurance pays the death benefit if the insured dies within the term of the policy. In the end, when you compare term life insurance rates you must decide if you want the most affordable coverage or coverage that will offer some additional cash back, but will cost a little extra per month.
The author is Pete Loren who is working in magazines. The article is about endowment life insurance policy and compare term life insurance rates.
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Endowment Life Insurance

There are many different types of insurance policies that are available, but some people choose endowment life insurance because of some of the benefits that go along with it. This type of insurance policy pays out upon maturity or upon the early death of the individual that holds the policy. You can choose a number of different terms for this type of insurance policy, generally 10, 20 or 30 years. There may also be age limitations as to when the policy will mature.
One other option that you may have available to you is that there are some endowment life insurance policies that will pay out upon the policy holder having a critical illness. This can benefit everyone involved, as it is often a time of increased financial stress and you may need the money that is in the policy in order to pay for medical expenses as well as for a loss of income. It would be a good idea for you to check with your insurance agent if your policy will pay out should you happen to become critically ill.
One of the benefits of choosing this type of insurance policy is the fact that, regardless of how much you have paid in, the beneficiaries are going to receive a settlement according to the terms of the policy. If you should happen to take out a 30 year policy and something should happen to you after just a few years, the beneficiaries are going to receive the same amount of pay out as they would if it had matured at 30 years. Many people like the peace of mind that they get from knowing that their loved ones will be taking care of while at the same time, they are investing in their own future.
Of course, this type of policy is not going to be for everyone so it will be a good idea for you to examine all of your options in advance. This would not only be true of checking out other types of life insurance but it is also true with getting various quotes from different insurance companies. Along with that, you would want to check into the tax benefits of these different types of insurance policies as there are differences in that area as well. This can really help you to choose something that will not only benefit you now but will benefit everyone involved in the future.
Visit for more Annuity and Life Insurance Tips and Tricks.
Call Robert Eldridge directly at 800-643-7544.
Robert Eldridge holds over a decade of experience as a multiline agent in multiple states and currently serves on the membership council of the National Association of Insurance and Financial Advisors
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How to trade in your endowment

If it looks as though your policy is not on track to
repay the mortgage, one option is to throw in the towel and sell it on
the 'second-hand' market. Richard Evans reports

If you have just received a "traffic light" letter from your
endowment provider warning that your policy is no longer on track to
repay the mortgage, your first instinct is probably to fire off a
mis-selling complaint.

Many people also pick up the phone and call a company that
deals in traded endowments. Many of these firms claim policyholders can
get up to 30 per cent more money from selling their policies to a third
party, rather than simply surrendering them to an insurance company. But
in fact, only a very few people will achieve this kind of mark-up.

In order to have any chance of selling on your endowment
policy it has to have been running for a third of its term - or a
minimum of five years - and have a surrender value of at least £1,000.
It also has to be a with-profits endowment. Some insurers, such as
Allied Dunbar, sold "unit-linked" plans but there is no second-hand
market for these policies.

But even if your policy meets these criteria, you may still
struggle to find a buyer. Only policies offered by certain insurers tend
to command a premium. Alan Lewis, who runs Lewkay Financial Services, a
Billericay-based independent financial adviser that specialises in
traded endowments, says the market can be unpredictable, but that it is
usually possible to obtain good valuations on policies from Royal
London, Britannic, General Accident, Co-operative Insurance, Liverpool
Victoria and Clerical Medical.

If you are unlucky enough to have an endowment with Eagle
Star, Britannia Life, Equitable Life, Life Association of Scotland,
Police Mutual, Provincial Life, Scottish Equitable, Scottish Life,
Scottish Provident and Winchester Life then you are unlikely to be able
to sell it.
This is not surprising, given that some of these companies
have inflicted the most punitive bonus cuts and the outlook for many of
these with-profits funds remains pretty bleak.
If you cannot sell your policy you have three options:
accept the surrender value offered by their insurer, keep paying the
premiums and run the risk of seeing little return on this money, or make
the policy "paid-up". This third option simply means you keep the
policy but stop making contributions - in some cases, though, this will
reduce the entitlement to the terminal bonus that is paid when the
policy matures.
But for those fortunate enough to be able to consider
trading their endowment, how should they go about it? If you contact The
Association of Policy Market Makers, an industry trade body, they will
be able to give you the names of a number of market makers.
Always call more than one market maker, as prices can vary
enormously. Although one may not want to buy your policy, another may be
willing to offer a significant premium. Remember, you need to have
details of the latest annual bonus and an up-to-date surrender valuation
from your endowment provider to hand when you ask for a quotation.
Lewis says that the amount buyers will offer in the open
market is unpredictable. He also warns that some endowment traders make
"indicative offers" rather than firm cash offers for your policy. The
indicative offers are not binding and you may ultimately be offered a
lot less, he says. So always double-check the price before selling the
Why do third parties offer more money for your endowment
than the company you bought it from? Simply because these investors are
hoping to cash in on future terminal bonuses.
As endowments are with-profits investments, the insurance
company adds bonuses every year if it thinks the performance of the
underlying investments - largely shares - justifies it. Provided these
policies are held to maturity the bonuses cannot be withdrawn,
regardless of stock market performance.
Because of this, insurers tend to err on the side of caution
when awarding annual bonus payments. Increasingly, a far greater
proportion of the total returns on an endowment comes from the terminal
bonus - the payment made on maturity. This terminal bonus reflects the
actual returns of the with-profits fund over the life of the policy,
over and above the bonuses that have been paid to date.
Of course, anyone buying a second-hand endowment gains the
full terminal bonus despite only paying premiums for a fraction of the
time that the policy has been running. Proportionately, they stand to
gain a far higher return on their money. Given the current investment
climate, terminal bonuses on many funds look set to be far lower than
they have been in recent years. This explains in part why buyers have
become far more choosy about which endowments they are prepared to buy
second-hand: they only want policies that are backed by the strongest
with-profits funds.
It is unusual for mortgage lenders to object to your selling
an endowment linked to an interest-only home loan. However, Lewis says
some lenders may insist that you switch to a repayment mortgage or that
the proceeds are paid directly to them to reduce the outstanding debt.
Don't forget that selling your policy means that you forfeit
its life cover, so you may want to arrange new life insurance. Remember
too that if you decide to sell on or surrender your policy, you can
still pursue a mis-selling claim.

The Association of Policy Market Makers can be contacted on 0845 011 9394, or via their website.