Endowment Insurance
(Because life can be surprising, and so can death)
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Insurance doesn’t have to be boring. That’s why we hired Sara East to be our BA insurance writer. Maggie specializes in making mundane subjects hella-entertaining.
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Neel Lane is an independent contract paralegal who specializes in Medicaid and VA benefits. He helps people access and maximize the benefits that they're entitled to. He has over 30 years of experience in this area.
Unforeseen things happen, and whether your death is unexpected or not, there's no coming back.
With that said, you'll be doing yourself and your family a favor by preparing for your exit. Our independent insurance agents will help you understand the most misunderstood life insurance option, endowment insurance, and help you determine whether it's worth the investment.
What is Endowment Insurance?
Put simply, it’s a life insurance policy that doubles as an investment or a savings account. It pays a lump sum after a specified number of years or upon death.
Each month you put a set amount of money into an account, and a specific portion of that money is used to buy life insurance. The rest is put into an investment fund.
Why Do I Need Endowment Insurance?
You never know when you will die, and while the odds might be slim in the immediate future, having life insurance is always a smart idea. There are a variety of life insurance options, and endowment insurance is just one of many.
Who Can Benefit from Endowment Insurance?
Since endowment insurance also serves as a savings account, it can help you be more responsible with your money. But at the end of the day, it doesn't necessarily offer a higher quality or more value than other options. Some people just prefer it.
The most common reason someone would get an endowment policy is:
- College savings
- Retirement
- Long-term life saving goals
However, we would be amiss if we didn't mention some scenarios where there’s most likely a better option.
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Scenario 1 - Endowment Insurance as College Savings
John and Jayne had a baby and named him Timmy. They want to start saving money for Timmy's college tuition, hoping to have $50,000 available when he turns 21.
The benefit of using endowment insurance for college savings is that the funds don’t count against financial aid. However, no life insurance counts against financial aid.
John and Jayne would be smarter to fund a traditional life insurance account. The funds can be used for Timmy when the time comes, or remain in the account for as long as necessary.
Scenario 2 - Endowment Insurance as an Annuity
John is a doctor and wants to save $400,000 by the time he's 50. John could save his money through an endowment policy, but he could do the same thing with an annuity. Plus, he wouldn’t have to deal with the insurance expenses of an endowment policy.
John's money would have the same protections from lawsuits and would still be tax-deferred, but an annuity offers more flexibility than an endowment policy.
Scenario 3 - Endowment Insurance for Mortgage Payoff
Jayne wants to pay off her mortgage by 65. She can have an endowment policy in place that would pay the balance of her mortgage even if she's still alive when she reaches 65.
However, Jayne could also take the money she would have paid into an endowment policy and pay it towards her mortgage and have it paid off before she turns 65.
What Does Endowment Insurance Cover?
The money you put into an endowment policy can be used for whatever you want. But it can’t be used until the year specified on the policy. The account will need to be emptied at the end of the policy’s term.
Even if you no longer need the set amount, you cannot extend the life of the policy nor take out less than the amount of cash in the account.
How Much Does Endowment Insurance Cost?
An endowment policy will most likely cost more than comparable options. This is because you're buying a policy that usually endows in a shorter time period than a traditional life insurance.
Remember, you're using this as a savings account as well. It’s not just a way to leave your family enough money to pay the bills you leave behind.
If you buy an endowment policy that matures in 20 years, the cash value will build faster than a traditional or whole life term policy. However, you’ll be paying a higher premium. The exact cost will depend on the time and money you're wanting to put in.
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Our independent agents shop around to find you the best coverage.
How to Find and Compare Quotes for Endowment Insurance
Endowment insurance is not a common choice, but it is an option. Our agents will work with you one-on-one to evaluate your situation and help you decide what type of life insurance policy is best suited for you.
Based on your unique needs, they’ll shop and compare policies from multiple insurance carriers and find you awesome protection at the best possible price.
Benefits of an Independent Agent
Our agents simplify the search process for finding the right life insurance. They’ll walk you through handpicked policy options and explain everything in language you can understand.
Endowment insurance can be pricey and it’s not for everyone. Let our experts handle the confusing stuff.
Use our independent insurance agent matching system to find the best insurance plan in your area. You tell us what you’re looking for, and our technology will recommend the best agents for your needs. Any information you give us will only be sent to the agents you pick.