In general, any endowment policy is a time specific agreement that agrees to pay a sizeable amount at the end of the term. The time period entirely depends upon which policy you opt for. Most of these policies usually mature in time gaps of ten, fifteen or twenty years. In other words, the invested amount or the premium eventually comes as a lump sum amount along with the profit.
While investing in these policies, the key to accumulating a good amount is to not cash the amount before its maturity. For example; if your endowment policy has a term of ten years, ensure that you withdraw the whole amount at the ten years and not before that. In case you withdraw it before the maturity of the funds, you lose the profit accumulated over the entire period of time, plus you don’t get the entire investment in return. This is also known as surrendering your endowment. In this scenario, the returns are entirely dependent on the concerned bank, who in turn decide your returns depending upon how much you have invested and more importantly, for how long have you been investing. All in all, even if you get the best possible deal, your net transaction amounts to loss.
So, in case you have been investing in an endowment that you’re not keen on continuing, surrendering it may not be the best alternative. Instead of opting for endowment surrender, selling endowment policies is another great option. There are plenty of takers for such second hand policies, and the best part is that they offer to pay you a measurably heftier amount as compared to the surrender amount offered by the bank.
Endowment policies come in two standard forms – with-profit and unit-linked. While buying a new policy, make sure you buy a with-profit policy, they are always more preferable as compared to unit-linked ones. Plus, it’s easier to sell these policies as second hands. If you have a with-profit policy that you want to get rid of, make sure you at least keep it with you for 5 years before selling it. With-profit policies that have completed five years are very easy to sell, plus their buyers offer a much heftier amount.
So the next time you are thinking of buying a new endowment policy, make sure you consider these factors well in advance, so as to avoid any regrets later. Or you could also consider buying a second hand policy; it’s not nearly as safe or profitable, but if you already have a handful of policies, you might as well try your luck at it.