Endowment Life Insurance

Endowment life insurance is often a single payment policy which acts primarily as an investment while providing life insurance protection. Endowment life insurance policies, like whole life insurance, are popular as a gift for children since cash value in the policy usually must remain untouched for between 15 and 20 years to realize its full cash value, at which point, it may be used for college tuition, living expenses, or even a down payment for a mortgage. There are different types of endowment life insurance policies, but they are all a very low risk investment offering moderate returns.

Full Endowment Life Insurance

In a full endowment policy, the amount of the final payout is guaranteed to be at least equal to the amount of the death benefit of the policy. If growth occurs, the payout could be considerably higher than the death benefit. Full endowment policies require a single payment or multiple lump sum payments and are a long term investment since the cash value generally has to remain in the policy for 15 to 20 years, or till you are 65 for some policies.

During the endowment period, the life insurance policy grows in value and can often accrue a cash value significantly more than the death benefit. There may be some exceptions in the policy including diagnosis of a critical or terminal illness in the insured person, allowing a policyholder to pull out the cash value earlier than expected.

Modified Endowment Policies

Modified endowment policies are not paid as a single lump sum, but have fewer than seven fixed level payments in a year. Endowment life insurance has tax advantages and modified endowment life insurance policies allow more individuals to use these policies as tax shelters.

The returns on investment of life insurance policies are tax deferred until they are removed from the policy and many consumers use endowment policies to save for retirement. Death benefits on life insurance policies are not subject to income taxes.

Low Cost Endowment

A low cost endowment policy has a decreasing life insurance benefit with an estimated growth rate that will meet a target figure at or before the end of the policy term. This type of policy is most often used to insure mortgages where the principal decreases as the death benefit decreases. In the event the insured dies during the policy term, the death benefit will pay off the existing mortgage and if the insured outlives the policy term, he will collect money on the investment. Similarly, applicants may decide to look into decreasing term life insurance or mortgage life insurance.

Other Features of Endowment Life Insurance

Endowment life insurance rates are higher than those of affordable whole life insurance since payment of the death benefit amount is guaranteed either to beneficiaries upon the insured person’s death or to the insured person when the policy reaches maturity. One disadvantage of endowment life insurance is that it lacks flexibility like universal life insurance, and the money cannot be used during the term of the contract except in specific instances, such as serious illness, outlined in the specific policy you buy.

Endowment Life Insurance As An Investment

Endowment life insurance pays a moderate rate of interest in a secured investment. The returns on investment are tax deferred which may make it attractive to some individuals considering life insurance as an investment. Taxes become due on the entire sum of the profits when the policy is redeemed.

In most endowment policies, the payment of the sum agreed upon at the policy’s inception is paid to the insured person when the contract matures. It can be used in both estate and financial planning to meet goals like retirement.

Life Insurance Quotes

The higher cost of endowment policies makes them primarily an investment with a life insurance component. TheLifeInsuranceQuote.com offers free, instant life insurance quotes on endowment life insurance, providing consumers online quotes to compare rates, policy terms and insurance companies to find the best policy available. Consumers can compare the rates of endowment life policies with other types of life insurance to decide whether endowment life insurance would make an affordable investment.

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