Cashing in an endowment policy early
What happens if i want to cash in my endowment policy early ?
The process of cashing in an endowment policy early is not overly
complicated but the policy owner needs to be aware of the
The first consideration is that the life assurance that is built
into the endowment policy is now owned by the new owner, so if the
original policy holder dies the life insurance payout goes to the
new owner and not the person named as the life assured on the policy
document. If the original policy holder doesn't need the life
assurance anymore, for instance because a new policy has been set
up, then it is no big deal.
Cashing in an endowment policy early does mean that no further
premiums are payable by the policy holder (or anyone for that
matter), however, if the endowment policy has been sold instead to a
trader or any other individual that considers it a good investment,
then the new owner continues with the regular premiums until
The original policy holder will receive a cash sum for cashing in
an endowment policy early from the life office but a significant
increase on this cash can be had by selling the endowment policy
instead to one of the many endowment policy buyers that exist. The
policy has to be a "with profits" policy in order to attract a
buyer. A unit linked policy is not a saleable item.
If the original policy holder is considering cashing in a unit
linked endowment policy early then the alternative of selling to a
trader is not an option.
The cash sum offered by the original life office in the case of
cashing in a with profits endowment policy early is an actuarial
calculation that takes into account many factors and the final
payout can be affected by what is called a Market Value Adjustment
Factor ( a reduction in the sum offered in order to lessen the drain
of funds remaining in the life fund allocated to those endowment
policy holders that do not cash in early.
If is a unit linked endowment policy that is being cashed in
early the sum received will be an amount calculated by multiplying
the number of units allocated to the policy on the cashing in date
by the unit price on the day. This can obviously vary, depending on
how the financial markets are behaving on that day. So cashing in an
endowment policy early of the unit linked type of endowment can give
more or less than expected depending on the markets volatility.
Endowment selling instead of cashing in an endowment policy
In order to stand the best possible chance of selling your
endowment please take note of the points below:
- Your endowment policy should be at least 5 years old.
- The endowment must be 100% "With Profits" - unitised
and unit linked policies are not saleable.
- The latest up-to-date surrender value must be at least £3000
- All the required information on the endowment selling form
has been supplied by you.
So if you are a "with profits" endowment policy holder and
thinking about cashing in an endowment policy early (known as
surrendering, in life assurance circles) you might also want to get
a quote for selling it instead to a trader by using the links above.