Selling an Endowment Policy
One of the main options available to an endowment policy holder who has been informed that their policy is likely to show a substantial shortfall is to sell the policy to one of the many companies now creating a secondary market in endowment policies.
Advantages of Selling over Surrender
Almost invariably, selling an endowment policy will generate more income than surrendering the policy back to the original provider. It is suggested that, on average, selling a policy will produce a return that is around 10 percent higher than if the policy was surrendered.
Which Endowment Policies can be Sold
Generally, the only endowment policies that a company will be prepared to purchase will be those that are ‘with profits’. This is not to say that other policies will not be saleable, but they do not produce the same level of potential return and are, therefore, less likely to produce a figure that is favourable to the surrender values.
It will also be necessary for the policy to be held with a reputable insurance company, for a period of at least 5 years and that the surrender value is at least £2,000.
Pitfalls of Selling an Endowment Policy
When an endowment policy holder is considering selling their policy, there are other wider issues that need to be considered. For example, endowment policies will have had a life assurance policy linked to the endowment payments.
When the endowment policy is sold, the life assurance will also disappear, meaning that the holder will have to look for an alternative way of ensuring that life assurance is suitably covered. Life assurance becomes more costly as the policy holder becomes older and the additional costs of finding life assurance at a later stage of life should be borne in mind when deciding whether to sell the policy or not.
Process of Selling an Endowment Policy
Once you have decided to sell the policy, you can contact a company or broker that purchases such policies and fill out a quotation form with all of the relevant details of the policy. You will then receive the offer price from the company or broker which will state how much they are prepared to pay for your policy. You will then have a period of fourteen days to decide whether you want to accept the offer.
Selling an endowment policy will often produce a greater return than if the policy was simply surrendered;
policy holders should ensure that they put alternative life assurance in place after the policy has been sold;
anyone wishing to sell their policy should contact a broker or specialist company for quotations; and
always compare this quotation with any surrender values.