Endowments - Consumer Aspects

Most endowment policies linked to mortgages are actually 'low-cost' endowment policies. What this means is that while the sum insured for life insurance purposes will be the same as the mortgage amount, the actual guaranteed pay-out on the endowment savings plan may be as little as a third of that amount.

The reason is that an endowment policy guaranteeing to cover the mortgage would obviously be too expensive for the borrower (and, therefore, impossible for a financial adviser to sell).

The difference between the savings plan's sum assured and the mortgage is assumed to be made up by the profits accruing to the plan during the life of the policy. However, the three-year bear market in equities in the early years of the new millennium resulted in many borrowers facing a shortfall on policy return ' generating yet another 'mis-selling' scandal.

See Also: Mortgage Centre and Mortgage Comparison Service for the latest facts and figures.

NO SURRENDER! Whatever you do, don't just throw in the towel tamely! If you have an endowment policy you no longer want or need, don't just surrender it to your policy provider. You are likely to get a far better return trading the policy through us.Call Moneyextra's experts on 0845 145 0145

Last Updated: June 2007 © Moneyextra.com

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