There seems to be a bit of buzz in the financial world at the moment with people looking to sell their endowment policies. Given that endowment policies are financial instruments which have intrinsic worth then its hardly surprising that a market for endowment policy sales exists between willing buyers and sellers. Good old capitalism hasn't died yet. The truth is that at the moment, particularly in the UK, there are probably more people looking to sell their endowment policy than those on the buying side of the equation. In this article I'd like to take a look at exactly what an endowment policy is and the reasons for people wanting to sell them before their terms is up, who the buyers of those policies are, and alternative for those wondering whether they should sell their endowment policy.
Endowment policies were the flavour of the year back in the 1980's particularly in Britian. In the UK they had certain tax advantages and in a high inflation period with limited other investment options they made a lot of sense for those who had 25 years or more to go before retirement and a home to mortgage. The idea was simple - well simplish. The idea was that the home owner bought an endowment policy. The policy was in effect an interest-only mortgage secured against their home. The policy owner paid the interest only repayments - which were of course significantly lower than a traditional, repayment style mortgage which included capital as well as interest repayments. Meanwhile the capital raises by the mortgage was invested in the share market. Some endowment policies, know as unit endowment policies, are directly linked to the share market with unit prices fluctuating widely in line with the share markets ups and downs. The more conservative "profit endowments" were more a managed investements with the finance company attempting to smooth the bumps in stock market performance and giveing a more consistent income stream from the endowment policy.
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