Endowment Surrender: How To Avoid Getting Short-Changed By Tony Head

Endowment surrender allows you to reclaim some of the value from your endowment policy by surrendering it back to the insurance company that sold it to you. The amount you receive when you surrender your policy is often significantly less than the actual value of the policy, but if your personal circumstances mean that you have to free up some of the capital you've invested in the endowment policy, you may feel like you have no choice but to accept the reduced amount offered by endowment surrender.

Don't Surrender Your Endowment - Sell It!
Many people who opt for endowment surrender are simply not aware that there are other options available to them. There is now a legal requirement for insurance companies to notify customers that endowment surrender is not the only way to recover value from their policy.

When you sell your endowment you could receive up to 35% more than the endowment surrender value of your policy. Provided your endowment is a sufficiently mature with-profits endowment policy, finding a buyer for your endowment policy is simple.

Endowment Selling Vs. Endowment Surrender
So if you need to convert your endowment policy into cash, make sure you look into selling the policy before you consider endowment surrender. Endowment surrender should always be your last resort - if you want to maximise your return from your policy, it definitely pays to be aware of all your options and look into how to sell your endowment policy. Endowment selling has become increasingly popular in recent years, and you'll find the process is much more straightforward than you might have thought. Some companies will tackle all the legal paperwork for you completely free of charge; they will even talk to the life company on your behalf once you have provided them with a simple signed authorisation.

This article was written by Tony Head on behalf of aap. aap is the UK’s largest specialist in the buying and selling of endowment policies, and could deliver up to 35% more for your policy than its endowment surrender value.

For more information on how to sell your endowment through aap and to get a free valuation, visit [http://www.aap.co.uk].

Article Source: http://EzineArticles.com/expert/Tony_Head/64232

Leaving the Endowment Policy in the Care of Kids or Company By Christina M Thomas

Now that you've set up the endowment policy to fund the future of the summer house you've bought for your children (or yourself, for that matter), other somewhat thorny questions remain. Among them: who will take care of the fund, itself? Are your kids responsible enough to make sure everything stays on the level? Are they much too busy with the rigors of their own lives and families to be burdened by this additional responsibility? It may at first seem like a minor question; but, the future of your established endowment depends on it. Luckily, there are several options available...

Endowment Management

One of the better material ways to leave a mark for one's offspring is to establish an endowment, usually for a vacation retreat of some sort (log cabin, summer home, winter lodge, etc). Securing enough money for the principle, such that most or all of the future expenses of such a gift will be taken care of, is often a lasting source of appreciation between parent and kid(s), as well as future generations. Once the money is secured, however, there is often one crucial consideration that a parent must make upon establishing an endowment, and it is second only to the amount of money intended to be left behind: who should manage the endowment policy. Unless responsibility is to be delegated to a child or children, there are really only two options - either the insurance company from which the endowment was procured, or an external manager (as in a trust company) independent of the endowment-assigning-company altogether. There are good reasons for doing either and these are of course dependent on the parent's ultimate wishes for the management of the endowment.

Trust Company Management

In this scenario of endowment policy management, the policy is put into the hands of a professional investment manager, specializing in trust funds. Performance is secured by the fact that the "leasing" company (the company that originally drafted the endowment policy) doesn't just give the policy away; the trust company is merely hired, and can be fired for poor performance. This option is usually a good one for endowment policy-establishers who have questions as to the responsibility of their heirs, or even of the original company, if they don't actually specialize in managing endowments, just in selling them.

Of course, distrusting ones heirs isn't the only good reason to outsource the management of an endowment policy; it can also be done simply to ease the responsibility of annual management of the endowment, and all of the related investment information (stocks rising and falling, etc). In the scenario of trust-company-management, they will even take care of the associated taxes, reporting them back to the original company, which may or may not (depending on the terms of the original agreement) then forward the necessary tax-forms to the endowment policy-holder.

The other alternative is to simply keep the endowment policy with the original company from which it was purchased. Usually in this case, however, a lot more hands-on work and management is required from the beneficiaries, who can delegate amongst themselves managers for the endowment policy.

Christina thinks that deciding whether to leave your visa black card endowment in the care of your offspring or a trust company can be nearly as difficult as establishing it in the first place. One should speak to an experienced insurance agent, one well-versed in the area of endowments, specifically, and measure all the options. Article Source: http://EzineArticles.com/expert/Christina_M_Thomas/1061406

Endowment Mortgages By Jame Smith

What Is An Endowment Mortgage?

An endowment mortgage, in theory, is supposed to lower your mortgage payment. Ideally, endowment mortgages are much cheaper than standard mortgage policies such as repayment mortgages. When you get an endowment mortgage, you pay only the interest on the amount borrowed. In addition to this, you pay an addition small sum into a policy that is supposed to be ever-increasing: the endowment policy. This policy is supposed to grow and grow, and at the end of the mortgage term you use this money to pay off your capital.

"The customer pays only the interest on the capital borrowed, thus saving money with respect to an ordinary repayment loan; the borrower instead makes payments to an endowment policy. The objective is that the investment made through the endowment policy will be sufficient to repay the mortgage at the end of the term and possibly create a cash surplus."
- Endowment Mortgages, Wikipedia, June 2006

Endowment mortgage is actually not a legal term. This type of mortgage policy was popular in the 1980s, especially in the UK, but natural fiscal problems and stock market lows made many of these policies practically worthless. An endowment mortgage is always going to be hit or miss. When they work, they really work well. When they don't work...then, things aren't so great.

"With an endowment mortgage, the borrower only pays the monthly interest to the lender while investing an additional monthly sum into a policy that is usually invested in equities. The theory is that this "endowment policy" should grow sufficiently, with long-term share price rises, over the course of the mortgage (usually 25 years) that the capital debt can be repaid at the end of the term."
- Q & A: Endowment Mortgages, Business Times Online, June 2006

And If Things Go Wrong With My Endowment Mortgage?
"With an endowment policy, you lay yourself open to the vagaries of the stock market and the competence of the policy manger. You must also closely monitor the performance of your policy to make sure you are contributing enough."
- Q & A: Endowment Mortgages, Business Times Online, June 2006

Let's say, for instance, that you get an endowment mortgage. This type of mortgage has been getting more and more attention recently, and some consumers are starting to think it might just be a good idea again. So you get an endowment mortgage and start paying off your interest regularly. With equal regularity, you deposit a certain amount of dollars into your endowment policy. Only, the stock market doesn't do so well. Stocks are low, the economy takes a plunge. Twenty-five years go by, and you discover that your endowment policy does not have enough in it to pay off your capital. All your interest has been paid, quite nicely, for two and a half decades, however. So, what about that capital loan that needs to be paid off?

You'd better find a way to pay it off...somehow.

"The underlying premise with endowment policies being used to repay a mortgage is that the rate of growth of the investment will exceed the rate of interest charged on the loan. Towards the end of the 1980s when endowment mortgage selling was at its peak, the anticipated growth rate for endowments policies was high (7-12% per annum). By the middle of the 1990s the change in the economy towards lower inflation made the assumptions of a few years ago looks optimistic."
- Endowment Mortgages, Wikipedia, June 2006

"When you took out your mortgage with an endowment policy, the aim was that the policy would grow in value. However, as the value of most policies is linked to the performance of the stock market there is usually no guarantee that the policy value will be sufficient to repay the mortgage at the end of the mortgage term."
- Consumer Information, FSA, June 2006

James has been writing about endowment mortgages [http://www.1mortgagesuk.co.uk] for many years and offers information on the different types of mortgages available from the web site [http://www.1mortgagesuk.co.uk] Article Source: http://EzineArticles.com/expert/Jame_Smith/34232

Selling Endowments By Gord Collins

Many homeowners in the UK during the 80's and 90's purchased endowment policies. They were sometimes called mortgage endowment policies. These policies were a form of insurance and investment savings that would cover the final cost of the home mortgage when it came due. The policy holder would make monthly payments and these payments were to cover their mortgage and provide for some savings.

Despite intentions or promises, investments can vary in end value, and these policies did not come with a guarantee that they would pay out enough to repay the mortgage at the end of the policy term. What's occurring now is the endowments have a shortfall and cannot pay the owners mortgage payments. In some cases, endowment holders are reporting shortfalls of tens of thousands of pounds.

That has resulted in a lot of stress and disappointment for the policy holders. Many in a state of frustration are surrendering them to the issuing life companies for much less than their value. Life companies include Norwich Union, London Life, Scottish Widows, Prudential Life and many others.

Selling on the Secondary Market

Finance companies have appeared who help find buyers for these policies. Endowment policies can be traded, bought or sold on the open market. A few of the endowment policy trading firms have access to extensive numbers of potential buyers who are looking for the right type of policies to purchase. That means sellers can access buyers who are more interested in their particular policy and that results in a higher price.

Left to their own devices, endowment policy holders don't have access to the right services. Without a strong base of potential buyers, they're not likely going to receive the full value of their policy.

What is a Traded Endowment Policy?

Traded endowment policies or TEPs are policies which the original policyholder has sold and that includes the assignment of all future benefits. Endowment policies are long-term and fairly rigid in design. Many policy holders realized that the endowment policies do not meet their changing financial circumstances and goals. They can borrow against the value of the policy as it is considered a viable asset by banks and finance companies. They can also unload the endowment policy by selling them.

Only about a third of all endowment policies reach full term, (e.g., 25 years). Many are or were cancelled within a few years of their conception. That leaves about a third that may reach full term.

Traded Endowment Claims

Endowment policies were sold as a savings instrument that would help to cover long term home mortgages. Many didn't and won't and that has resulted in a lot of legal or mis-selling claims and the assurance companies who issued them. Financial services firms are offering to help with the process of policy holders selling their policies. To avoid scams and ripoffs in the UK, you should not sell your policy via any firm that does not adhere to the dictates of the Financial Services Authority's Mortgage Endowment Department.

There are numerous companies brokering or selling endowments and policyholders are recommended to ensure these companies are governed by the FSA in the UK.

In the UK, the government's Financial Services Authority has set out guidelines for managing endowment policy complaints and claims. The FSA's contact address is as follows: Mortgage Endowment Department, The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS.

Gord Collins provides marketing services for Endowment Express, a leading UK company specializing in Selling Endowments [http://www.endowmentexpress.co.uk], located in London, UK. Article Source: http://EzineArticles.com/expert/Gord_Collins/94535

Endowment Policy Buying Guide By Robert Prime

Endowment policy is a combination of life insurance and investment growth saving plans. It is a premium based package that is valid for a specified period. The premium paid by the policy holder into the endowment is invested by policy office in the stock market. On the maturity of the endowment policy the policy holder is paid the agreed amount along with bonuses. Incase the policy holder dies in mid-term then the insurance amount is paid to his beneficiary. Endowment policies are also used for repaying the mortgages but incase of endowment mortgage the monthly premium will also include the interest on the loan.

Evaluate your needs: There are various types of endowment policies namely non-profit Endowment Policy, Traditional With Profits Endowment, Low Cost Endowment Policy, Unit Linked Endowment Policy, and Traded Endowment Policy. Each has its own pros and cons as their workings and methods of growth are different from each other. It is advisable that the policy holder should evaluate his financial needs and consults a professional before buying an Endowment Policy. Educate yourself to understand the features of each type of insurance policy and then select the policy that benefits YOU personally and suits YOUR needs.

Check the reputation of the insurance company: Make sure you select the top endowment company for buying an endowment policy. The reputation and previous records should be checked thoroughly before making the final decision to buy an endowment. Find out the company's market standing. Don't trust your agent blindly and verify the facts yourself. Go for company with credible ratings given by a credible agency.

Evaluate the Front-End Loading: The set up cost, administration charges and commission payments are usually higher in the early years and are hidden within the monthly premiums. These initial costs are known as front end loading. Therefore, before you choose an endowment find out the charges and past performance of the fund.

Check the Endowment Mortgage Fee: Incase of endowment mortgage, calculate the mortgage fees carefully and try to evaluate the mortgage package before buying an endowment policy. At times, the lender charges additional front loan or processing fee, so carefully plan the investment to avoid defaulting.

Endowment Selling and Surrendering Options: A good alternative to surrendering is endowment policy selling. In this, the policy holder can sell the policy in TEP market and fetch a fair value of the policy. The main advantage here is that the policy holder usually gets much more than the surrender value offered by the insurance company.

More Endowment Policy Buying Tips

• Take help from a financial consultancy as it is a long-term investment.
• Check the amount of premium payments and your affordability.
• Carefully read and review the insurance agreement before signing for it.
• Invest only if you intend long-term investment as surrendering it in early years can prove costly.
• Do thorough study and clear out all your doubts with insurance company and the financial advisor before you strike the deal.
• Check the flexibly plan and alternate options for protection against uncertain changes in your financial needs.
• Select a reliable insurance company and choose a right policy to gain maximum benefits and tax relief.

For selling or surrendering your endowment policy, contact www.endowment-policy.co.uk. You can also seek expert advice for valuation and get free compensation assessment of your endowment policy.

Robert Prime is a professional author who has written many articles on various topics & this time writing article on Endowment Policy Buying Guide. For more details about Endowment Policy Buying Guide visit: [http://www.endowment-policy.co.uk]
Article Source: http://EzineArticles.com/expert/Robert_Prime/142260

Endowments and Endowment Shortfalls - What You Need To Know By David Miles

Endowments and endowment mortgages have received a lot of bad press in recent years, amid concerns over falling policy values and accusations of endowment miss-selling.

This article attempts to answer some of the questions and concerns you may have about the way endowments work, what's happening to them, and what you can do to ensure your mortgage is paid off at the end of the term if you have an endowment
mortgage.

What is an endowment mortgage?

There are two basic types of mortgage. The first is a repayment mortgage, where you make one monthly payment to the lender which is part interest and part repayment of the original capital.

Then there are interest-only mortgages, where your monthly payment to the lender is just the interest on the original loan and the mortgage debt remains unchanged. You then make separate payments into an investment scheme (such as an endowment), with
the idea being that at the end of the mortgage term this investment will have grown sufficiently to repay the mortgage.

An online mortgage calculator can give you an idea of the difference in payments to your lender between an interest-only mortgage and a repayment mortgage.

Interest-only endowment mortgages were very popular in the 1980s and 1990s and were often chosen in the belief that the endowment would end up being large enough to clear the mortgage and still leave a tidy sum of money left over as a bonus.

How do endowments work?

An endowment is a long-term savings policy, typically running for ten to twenty-five years. An endowment plan has what is known as a "sum assured" value. If the policyholder dies during the life of the endowment, it pays out the sum assured. In the case of endowments linked to mortgages, the sum assured is equal to the size of the mortgage. The payout in the event of the death of the policyholder is guaranteed but, if the policyholder survives, the final value of the endowment at the end of its term is not guaranteed.

Endowments can be unit linked, which means that you buy units in a fund, or they can be "with profits".

How does money grow in a with profits endowment?

There are two ways in which a with profits endowment can increase in value. Firstly, the insurance company may add a bonus to your policy each year. This is known as a reversionary bonus and is usually a percentage of the amount of profit made by the fund over the previous years.

The amount added in this way may only be a small amount. However, once added, these bonuses cannot be taken away - hence the name reversionary bonus - and will belong to you when the policy matures.

Then there is the terminal bonus. This is a separate sum of money which the insurance company can add to your endowment policy when it matures. These terminal bonuses are discretionary and may not be applied at all.

What are the advantages of with profits endowments?

The idea of a with profits endowment is to smooth out fluctuations in the stockmarket.

With a non-with profits endowment, your investment is linked 100% to the stockmarket. Therefore, there is always the possibility that the investment value could fall just at the time when you need the money.

By using with profits endowments, insurance companies get round this problem by giving you a slightly smaller percentage of any fund growth as an annual bonus and try to smooth out future annual bonus declarations.

The point of this is to try to ensure that, no matter what happens to the returns of the fund, you are guaranteed a certain minimum amount when then endowment policy matures.

Why don't you get the entire year's gains as a bonus?

On the one hand, the insurance companies and their fund managers want you to have as much security as possible - hence the reversionary bonuses which cannot be taken away at a later date.

On the other hand, they are also trying to maximise long-term growth by investing your money in stocks and shares, property, gilts, and cash. All of these involve a degree of risk.

What is the problem with endowments?

Anyone taking out an endowment policy, whether on a with profits or unit linked basis, has to be given a written illustration by the insurance company of how much the policy might be worth at maturity. When providing these illustrations, insurers have to make an assumption as to the rate of growth per annum that will apply to the money you are paying into the endowment. This assumed rate is known as the projected rate, and there is no guarantee that this rate will be met in reality.

Until a few years ago, the projections were usually based on a mid-range growth rate of 7.5% per annum. In the early 1980s, the assumed growth rates used in the illustrations were even higher. Therefore, the monthly endowment premiums were low by today's
standards, because they were set to reflect these high projected growth rates.

Interest rates and other economic factors, such as stock market growth and interest rates, are much lower now than they were in the 1980s and 1990s, so it has now been necessary to reduce projected rates of growth for people taking out a new endowment policy today. As a result, the monthly premiums for a new endowment policy today will be higher than they were in previous decades.

How does this affect existing policyholders?

Because actual growth rates have been lower than the projected 7.5% rate, an endowment policy taken out in the 1980s or 1990s may now not be worth enough at maturity to pay off the interest-only mortgage to which it is linked.

Insurance companies are therefore assessing the state of people's policies and contacting them to advise what action they should take now to avoid a potential shortfall at the end of their mortgage.

How will I be affected?

In most cases, if you took out a with-profits endowment in the mid-1980s or earlier, the fund should be sufficient at maturity to pay off the mortgage. This is because the money in your endowment policy will have benefited from the higher rates of interest and better stock market growth of the 1980s.

But, the shorter the length of time your endowment has been running, the greater the potential for a shortfall at maturity.

It is impossible to predict exactly how large this shortfall may be, as so much depends on future fund performance between now and the time when your endowment matures. Insurance companies are trying to assess the issue by looking at how much has been
accumulated in your fund so far and making more conservative estimates about future growth.

What can I do now?

There are a number of options:

1. You can increase payments into your existing endowment policy (subject to Inland Revenue rules), or take out additional endowment policy with the same insurer or a different insurer. However, you may decide you don't want to be tied into another
endowment.

2. You can ask to extend the term of your endowment policy, subject to your mortgage lender agreeing. This is probably not a good idea if it means your policy would continue beyond your retirement age.

3. You can set up an additional investment, such as an individual savings account (ISA). An ISA may be cheaper and can offer a wide range of investment choices to suit your attitude to risk.

4. You can ask your mortgage lender to switch part of your mortgage (equivalent to the projected shortfall on your endowment) to a repayment mortgage. You can get an idea of the costs of the new repayment part of your mortgage by using an online mortgage calculator.

5. You can use any other spare lump sum to pay off part of your mortgage. You will need to check first to see if this would make you liable for any early redemption penalties from your lender.

Which is the best option?

Everyone's situation is different, and everyone has their own particular preferences. If you are unsure what to do, you should take professional mortgage advice to help you review your options and come to a decision as to what to do.

Should I just cash in my endowment?

This would almost certainly be a mistake. Many endowment policies are structured such that the management charges are highest in the early years. If you surrender the policy early on, the amount you get back may well be less than the amount you have paid in up
until now.

Also, you need to bear in mind that a large proportion of the final value of a with profits endowment depends on its terminal bonus. The size of this bonus will not be known until the policy matures.

So, the best strategy is normally to keep the endowment in place. If you need to cut down on your monthly outgoings, you can leave a policy "paid up" (although you may incur penalties for doing this). This means that you do not pay any more money into the
endowment, but leave it to mature on the original date for a lower amount. If you do this, you will need to make sure you still have sufficient life cover to protect your mortgage.

It is possible to sell endowment policies on the second-hand endowment market. The amount you get will depend on the policy and how long it has left to run. Again, this is an area where you would be well-advised to talk to a professional before taking any
action.

Please note that this article is for general guidance only and does not constitute financial advice. You should seek professional advice with respect to your own specific circumstances.

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Copyright 2004 David Miles. You are welcome to reproduce this article on your website, so long as it is published "as is" (unedited) and with the author's bio paragraph (resource box) and copyright information included. In addition, all links to external websites must be left in place.

David Miles is the editor of a number of personal finance websites including UK Mortgages & Remortgages [http://www.mortgages-remortgages.net] and The Cash Clinic - a UK Personal Finance Portal [http://www.thecashclinic.com]. Article Source: http://EzineArticles.com/expert/David_Miles/2287