Endowments Guide | Endowments Help Product Information

TheMoveChannel.com | Other Types Of Endowment Policy

Three other types of endowment can also be found in use in Britain:

Unitised with profit endowment

This is a hybrid unit-linked endowment, designed to smooth out price fluctuations that occur with unit-linked policies. The value of units is declared each year and that value is then guaranteed. The guaranteed value that is declared is at a discount to the actual value of the units. The guaranteed value will not reach the real value until the term of the endowment is up, so the chance of being able to pay of the loan early is minimised. This type of endowment is becoming increasingly common, especially due to the volatility that has been displayed by the stock market over the last few years.

Low start endowment

This is essentially the same as a low-cost endowment, but premiums begin at a lower level and gradually increase over a number of years - usually between five and ten. The initial premium can be significantly lower than the full premium, but never lower than half (which is a common starting point). Premiums may, for example, increase from 50% to 100% of the final value by 20% per year for 5 years or by 10% per year for ten years.

This is another product designed to make it easier to budget over the first few years of home ownership, when money is likely to be tighter for many people. As with most products that work this way, you generally have to pay for it in the long run. The overall level of premiums you pay will be higher than with a low-cost endowment, and the cash-in value will be lower for longer. You are likely to be seriously out of pocket if you try to cash in your low-start endowment much before maturity.

Non profit endowment

The guaranteed death benefit or sum assured equals the value of the mortgage loan. This type of endowment also guarantees repayment of the loan. There are no annual or final bonuses and you generally have no chance of a cash surplus on maturity. Essentially, there is no benefit other than life cover. This is seen as an inefficient method of saving the money to pay back and is therefore rarely used to repay a mortgage.