Endowment insurance basics

It is important to know the exact terms of your contract when signing an endowment policy to avoid getting caught with any disappointing surprises in the instance a tragedy should occur. Important factors to pay attention to when purchasing an endowment insurance policy include: the length and terms of coverage, the benefits at its maturity, investment rates and the premiums you will pay.

Endowment insurance vs. life insurance

Most endowment insurance contracts are viewed as an investment product that you purchase from a life assurance company. Life assurance is simply a fancy word for life insurance, meaning that they will pay out if you die during the term of your policy. Whole life insurance (or assurance) plans are not to be confused with endowment insurance. The main difference to note between an endowment policy and life insurance is that an endowment policy will pay the face amount of the contract as its assured sum. This payment is made upon the death of the insured or on a fixed date, whichever occurs first. Endowment policies only provide coverage for a defined number of years and are much shorter than life insurance policies. With a life insurance plan, the payout only happens upon the insured’s death. Life insurance plans are often referred to as whole life insurance plans because they can span an entire lifetime, up to a certain age (in most cases).

The perfect gift

Endowment insurance can be purchased as an investment, a form of protection for your family in case of sudden death or critical illness (in some cases), as a gift or package for one’s future planning or as a savings plan to be paid in full to you when the policy reaches its full maturity.

Maturity lengths

Endowment insurance contracts are designed to mature a specific amount of money after an agreed maturity date is reached. Typical maturity lengths agreed upon with most endowment policies are ten, fifteen or twenty years up to a certain age limit. Once the full amount of time has been reached and the policy has matured, if the policyholder is still alive, they may cash in their policy. In this way, endowment insurance can be viewed as a savings plan.


Premiums paid for an endowment policy are much higher than those paid for a whole life policy. There is a much faster accumulation of cash funds because of the higher premiums associated with endowment insurance. Due to the limited amount of time associated with this type of policy it acts as a forced savings account, often used for retirement or to fund a child’s education. Whole life insurance policies are more likely purchased to protect a spouse, help heirs pay inheritance taxes, as an estate planning tool or simply to cover the costs of the insured’s end of life expenses.