 Sam
Site Admin
Joined: 21 May 2005
Posts: 281
Location: CALIFORNIA
117.49 Dollars($)
|
 Posted: Sat Jun 19, 2004 5:02 am Post subject: What is a Low Cost Endowment Policy? |
|
|
Low cost endowment policy includes a combination of a life assurance plan and an endowment savings plan. It helps to maintain a cash reserve in order to pay off the mortgage. Endowment policies are also known as "house purchase endowments".
When you avail an endowment policy, you pay only the interest on the mortgage and not the principal amount. In general, an endowment policy includes a 25 year savings plan used to build up sufficient amount to repay the capital sum of money. However, if the policy helps to accumulate more funds than the loan balance, then the investor receives the extra cash tax-free. But in case the amount is not enough, the investor will have to compensate for the shortfall.
A low cost endowment policy, however, does not guarantee that it will pay off your loan in full at maturity. The growth assumption rate is used to determine the monthly mortgage payment. If the profit for this policy is less than the initial growth assumption, you will have to gather additional funds to make up for the shortfall.
Unlike a typical low-cost endowment policy, a with-profit low cost policy is a repayment plan that guarantees an annual growth rate and to pay off the entire loan amount at maturity. Your monthly investment premium will be pooled with premiums of other investors. The premiums are then paid into a fund that is managed by the mortgage company.
Depending upon the performance of the fund, the bonus for a particular year is added to the premium. At the end of the life of the plan, a final bonus is paid which can help to pay off a major portion of the principal loan amount. This kind of an endowment policy guarantees the repayment of the loan within the specified loan term. |
|
James Hogg
Guest
|
| Posted: Tue Oct 04, 2005 5:02 pm Post subject: |
|
|
Hi,
An endowment policy combines a savings policy and life insurance. If you have a with profits endowment, your monthly premiums are pooled with those of other investors and invested. You are awarded annual or reversionary bonuses according to how well the investments perform and a larger terminal bonus at the end of the term.
And if you have a unit linked endowment, your premiums are used to purchase specific units in stock market-linked investments. The potential for growth is larger than with profits endowments but the risk is greater.
So, it will be a wise decision to have a 50 percent share of both types of endowments. |
|
