These policies are life-assurance policies that combine life assurance and savings. Historically, they were often used as saving schemes and were very popular as a method of funding interest-only mortgages – because the savings side of the scheme could be used to build a fund for mortgage repayment, while the life cover provides a lump sum if the party borrowing dies during the mortgage term.

This is a policy that is bought through a life assurance firm. It is used as a savings plan which pays out a lump sum after a fixed period of time. The policy includes life insurance so that a lump sum is paid out should the policyholder die during the term. Some people use this type of policy for a specific savings plan or for general investment.

There are various types of these endowments, with plans varying according to the structure of the underlying investment.

As the policyholder, you choose the amount you want to save each month, and when you want the policy to end (mature). Based on these contributions, you’re guaranteed a certain pay-out, called an ‘endowment’ when the policy matures.

Endowment policies were once frequently used to pay off Interest-only mortgages; but not anymore as, quite often, the amount generated was not enough to pay off the required amount (endowment) when the policy matured. The endowment can be used for education fees and other costs such as living expenses. If the policy holder should die before the policy matures, the child will receive the death benefit and also still have money for university or college fees.

The range of investment structures offered in these products is similar to those for a whole-of-life plan:

• The difference between an endowment and a whole-of-life plan being that an endowment runs over an agreed term.
• If death occurs during the term, life cover (the guaranteed sum assured) is paid out, whereby if the policy runs for the full term and ‘matures’ an investment value is paid out instead.
• During the term, the policyholder keeps up payment of regular premiums.

Endowment life insurance policies guarantee a certain return on a fixed date, as long as payments are maintained monthly. The cash value isn’t counted against the child’s financial aid eligibility – what’s more, could this be the savings plan you’ve been looking for to help your child through college or University?