Endowment selling is the practice in the United Kingdom of selling an endowment policy

Endowment policy

An endowment policy is a life insurance contract designed to pay a lump sum after a specified term or on death. Typical maturities are ten, fifteen or twenty years up to a certain age limit...

 to a third party. This is often an attempt to gain more money than the value given when surrendering the policy to the original life assurance company.

Background

With-profits

With-profits policy

A with-profits policy or participating policy is an insurance contract that participates in the profits of a life insurance company. The company is often a mutual life insurance company, or had been one when it began its with-profits product line...

 endowment policies were aggressively sold for many years, including during the 1980s, by insurance companies. The policies were marketed as an almost guaranteed way to pay off a mortgage

Mortgage loan

A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...

and leave the policy holder with a lump sum once it had matured.

The with profits endowment policy was sold alongside an interest only mortgage. By only paying interest, mortgage repayments were kept low. The endowment policy also had monthly premiums to pay which ran for the term of the mortgage. The policy would rise in value as premiums were paid and through profits from investments, paying off the mortgage when the policy matured.

However, many policies did not increase to the level that was required.

Surrendering vs. selling

When it became apparent that many policies would not cover the cost of the mortgage loan, policy holders sought alternative methods to repay their mortgage and dispose of their endowment policies. Whilst initially, the only method was to surrender (cancel) the policy with the life assurance company themselves, obtaining the surrender value calculated by them, a second hand market slowly developed, providing policyholders with much added value over their surrender values.

Now, many companies offer to buy the with profits endowment policy from the holder for more than the surrender value. This practice has created a thriving industry of endowment policy buyers. Members of the public can either contact these companies directly or they can use the services of a Traded Endowment Specialist.

Traded Endowment Specialists are companies that deal exclusively with Second Hand Endowment Policies and obtain offers from the entire market. They can also provide offers from some buyers that do not purchase directly from the public and will only offer through these Traded Endowment Specialists.

Not all purchase offers are the same as some buyers will purchase on a 'guaranteed-offer' basis whilst others will make initial offers that are subject to sale. These offers are not guaranteed as there is no definite purchaser in place. Yet other companies retain the right to revalue or cancel their offer at their discretion throughout the sale. A Traded Endowment Specialist can assist you in understanding the nature of the different offers you receive - making sure you don't end up with an offer that is not suitable for your circumstances.