Life cover - an important consideration when selling an endowment policy
The last few years have seen a boom in the traded endowment policy (TEP) market, with many policy holders finding it a profitable way to cash in on an investment that has been a financial white elephant for most of the last decade. But those tempted by the increasingly large sums on offer should remember that cashing in will leave them without life cover – one of the forgotten benefits of the much-maligned endowment policy.
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Rising equity prices since 2003 have seen a recovery in the value of many endowment policies, while many of the mortgages they were once linked to are now being paid by other means – one of the results of the endowment mis-selling scandal of the turn of the century.
A willing market of investors
Consequently, many people have found themselves with policies they don’t need, and have found a willing market of investors attracted by the guaranteed returns of with-profit funds, the fact that a fund’s charges are greatest in its first few years (and so are effectively paid by the first policyholder), and a desire for healthy diversity in their investment portfolio. Such investors will often offer thousands of pounds above a policy’s surrender value and take on the payment of all its future insurance premiums.
The TEP market is regulated by the Financial Services Authority, and firms specialising in the buying and selling of endowments should belong to The Association of Policy Market Makers (APMM). The APMM – or an independent financial advisor – is a good starting place for anyone thinking of selling a policy.
Life Cover could be inadequate if selling
But selling a policy means its associated life cover will end – something often overlooked when people surrender or sell on their policies. Even if other life cover has been put in place – for example, when taking out a new mortgage – it may not have been calculated to fully cover a family or other dependents’ financial obligations should the endowment policy holder be taken ill or die.
Anyone selling a policy should therefore review their life cover arrangements as part of the process – and ensure they have adequate cover in place.
Jump Money is a specialist in Life Insurance and is happy to answer any questions you may have related to life insurance, life assurance, term assurance and life cover. To find out more about how Jump Money can make sure you have adequate cover for you and your family call now on 0845 8516262 or fill in an online quote form today.
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