Endowments Great if you like cheating

An endowment policy is a contractual savings agreement with a life insurance company. The usual term of investment is either 5, 10 or 15 years. You can invest a lump sum of money or you can invest on a monthly basis via a debit order.

An endowment policy is a good idea for people who have little or no discipline because it forces them to be committed to the payments. The important issue for consideration when investi

ng in endowments is affordability. Make sure that you can comfortably afford the premium each month so you don’t have to lapse the policy.

While they are good investments for people who tend to dip into their savings their inflexibility can be a problem. If you can’t keep up your payments,  the policy will lapse and you will in all likelihood get little if anything back. The broker who sells you the endowment policy will receive a commission, which will be taken out of your premiums. If you sign up for five years and lapse the policy; the insurance company is at liberty to claim all administration fees for the full term because you signed a contract to pay the premium for five years and you breeched that contract.

During the time you are invested, the insurance company will distribute your money across various assets such as shares, bonds, property and cash, and they will handle any income tax liabilities before distributing net earnings to the policy-holder. You can use an endowment to save for specific objectives like funding a child’s education, saving for the purchase of a home or saving for a family members wedding. You can also use endowments as part of a retirement strategy. When investing it is important to insure that you have the right mix of products in your portfolio and a good financial advisor will be able to assist you with this process.