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Endowment Life Insurance
By | March 6, 2010
Endowment Life Insurance Explained
Endowment Life Insurance covers the Insured for a “stated period of time”. It is sometimes called “Limited Period Insurance Coverage”. Endowment is similar to Whole Life Insurance except it matures faster. Endowment builds Cash Value faster because it has a much higher premium than other Whole Life plans.
Endowment pays the Face Value upon the Insured’s death or at the end of the stated period of time (e.g. 20 years for a 20 year Endowment policy, or at age 65 for an Endowment at 65 policy). The insurance company pays the Face Value and retains the policy Cash Value if the Insured person(s) dies while the policy is still in force. The Face Value is paid when the policy Cash Value equals policy Face Value; at that time the policy is said to be “matured” or “Endowed”. When the Insurer (insurance company) pays the Face Value, they keep the Cash Value of the policy, the same as in Whole Life policies.
Endowment has a much higher premium than Whole Life type policies. Therefore it gives the least amount of insurance coverage for a given premium, but the most amount of savings. It is the most expensive temporary insurance coverage.
A) Endowment builds Cash Value faster than Whole Life type policies because more of the premium goes to build Cash Value. Cash Value increases are tax deferred just as with other Cash Value type policies.
B) The shorter the premium payment period, the higher the premium will be. For example, if a 30 year old person buys a 20 year Endowment at 65 policy, the 20 year Endowment will have a higher premium and provide the fastest rate of increase in Cash Value. A 20 year Endowment policy might cost around $40 (example) per thousand, compared to $10 (example) per thousand for Straight Life.
The primary purpose of the Endowment Life Insurance policy is to provide rapid cash build up or for accumulation of funds over a stated period of time. These funds are available to be used for college education, retirement, or for any other purpose.
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