Endowment selling

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Endowment selling is the practice of selling an endowment policy to a third party. This is often an attempt to gain more money than the value given when surrendering the policy to the original life assurance company.

[edit] Background

With profits endowment policies were aggressively sold during the 1980s by insurance companies. The policies were marketed as an almost guaranteed way to pay off a mortgage and leave the policy holder with a lump sum once it had matured.

The with profits endowment policy was sold alongside an interest only mortgage. By only paying interest, mortgage repayments were kept low. The endowment policy also had monthly premiums to pay which ran for the term of the mortgage. Theoretically, the policy would rise in value, (through profits from investments) paying off the mortgage when the policy matured.

However, many policies fell in value or did not increase to the level that was required.

[edit] Surrendering vs. selling

When it became apparent that many policies would not cover the cost of the mortgage loan, policy holders sought alternative methods to repay their mortgage.

Surrendering the policy is effectively cashing it in to the original life assurance company.

However, many companies offer to buy the with profits endowment policy from the holder, often for more than the surrender value[1]. This practice has created a thriving industry of endowment policy buyers. Some of these buyers will purchase directly from the public whilst others will only offer through Financial Advisers.

Members of the Public or Financial Advisers, wishing to obtain a quote from all the buyers, can apply to FastTEPs [2] for a free and fast quotation. FastTEPS are regulated by the Financial Services Authority.