What Is an Endowment Policy?

All of us have been sold an endowment policy by an insurance agent at one time or another and most of these we dont know anything about. Well let me try explaining here what and endowment policy actually is.

Well an endowment policy is actually a contract like any other insurance policy between an individual and the company that on payment of premiums as specified in the contract, the company will pay a fixed amount plus accumulated profits that are declared annually on a fixed date in the future (or the nominees if the individual dies prematurely).

These are assignable, allowing the assured person to pass the benefits of the policy to a third party. The premium payed by the individual partly helps to pay for the life cover and the major part goes into the companies investments for the period of the contract. The profits thus earned from these investments are distributed among the policies. These are called bonus.

Bonus issues by each company highly depend upon the companies investments performances.

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