Endowments

An endowment policy is a type of investment that you take out with a life insurance company. You pay in money each month for a set period of time, and this money is invested. The policy will then pay you a lump sum at the end of the term – usually after ten to 25 years.

Many of these products now build in a life insurance element, so a beneficiary would receive the lump sum if you were to die before the end of the term.

Your regular payments (which may be monthly or annual) are used in two ways. Part of your payments are paid into a life insurance policy, and the remainder is invested – usually in stocks and shares. If the investments perform well, you’ll be paid bonuses annually, intermittently or at the end of the term.

Once your policy ends (or you die), you’ll get a lump sum, the amount of which depends on how well the investments have performed. If you die prematurely, the life insurance element also pays out to your beneficiaries.

The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.

Tax treatment varies according to individual circumstances and is subject to change.