Endowment Life Insurance Policy

What is an Endowment Life Insurance Policy?

An Endowment Life Insurance Policy is a specialized insurance product designed to pay a lump sum after a specific term or on death.

How does Buying an Endowment Life Insurance Policy work?

When you purchase an Endowment Life Insurance Policy, you can choose how much you wish to save each month and when you want the policy to mature. Based on how much you contribute monthly; you will be guaranteed a certain payout when the policy matures. If you should die before the policy matures, your child will still receive the payout as your death benefit.

It is important to note however, that the guaranteed cash value you receive when the policy matures, may be less than the sum of the premiums paid. This is because part of the premiums will be used to pay for the insurance protection while the rest is invested and will be subjected to investment risk.

Advantages of Endowment Life Insurance Policy

1. Forces you to Save

Endowment Life Insurance Policy will lapse if you fail to pay your premiums, this therefore discourages you from not saving.

 

Sources:

http://www.moneysense.gov.sg/Understanding-Financial-Products/Insurance/Types-of-Insurance/Life-insurance/Types-of-Life-Insurance/Endowment-Insurance.aspx

http://www.investopedia.com/articles/pf/12/endowment_life_insurance.asp