An endowment policy is a life assurance agreement proposed to pay a lump sum after a particular term or on earlier death. Endowments can be cashed in early - known as surrendered - and will then be paid the surrender value which is decided by the insurance company depending on how long the policy has been running and how much has been paid in to it.
For the duration of unfavorable investment circumstances, the encashment worth or surrender worth may be trim down by a 'Market Value Adjuster' to allow for the require to cash in units at a time when investment circumstances are not perfect. This means that the investor would take delivery of the surrender value less the market worth adjuster.
o An endowment policy is a mixture of insurance and investment: The life of the individual taking the policy is insured for a definite sum. This life cover is referred to as the sum assured. A definite part of the premium gets billed towards this sum assured. A quantity of portion of the premium is allocated towards the administrative operating cost of the insurance company selling the policy. The left over portion of the premium gets invested.
o An endowment policy might announce a bonus each year: The money that is invested produce a definite return each year. This return may be affirmed as a bonus. The bonus is characteristically generated as a definite proportion of sum assured or life cover as it is commonly recognized.
o The bonus affirmed is not to be paid right away: Like is the case with a stock dividend or a mutual fund dividend which is to be paid without delay after it is declared, the bonus affirmed build up and is to be paid only when the policy matures or in case the policy holder dies.
o The bonus declared does not multiple it, only accumulates
o Since the bonus declared does not compound returns are low
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