Can I find an endowment life insurance policy?


Endowment insurance is nowadays becoming increasingly hard to come by. Endowment life insurance policies account for a mere 1 percent of all in-force life insurance. The reason for the fact new endowment life insurance policies do not enjoy great popularity is that they don't meet the tax definition of life insurance.

Although endowment insurance is another traditional form of life insurance and many of the old endowment life policies remain in force, fewer and fewer people opt for it for tax reasons. The investment income from the cash surrender value of endowment policies is subject to federal income tax, making this type or life insurance less attractive than other life insurance policy options which allow you to borrow or withdraw the cash value on a tax-free basis.

These adverse tax conditions have forced life insurance companies to cease offering new life insurance endowment policies. However, endowment policies are still very popular in countries with more favorable tax regulations.

What is the idea behind endowment life insurance

An endowment policy resembles a whole life policy in that if the insured person dies within a certain period, the face amount is paid to the designated beneficiaries. If the insured survives to the end of the endowment period, the policy owner receives the face amount as a living benefit. There are a few variations of endowment policies: some are in force for a specific period of time, such as 20 years, while others 'mature' when the insured reaches a certain age, such as 70. Here is an illustration of how endowment life insurance policies work:

25-year-old Judith decides to purchase a 30-year endowment policy. If she dies within that 30-year period, her beneficiary will receive the death benefit. However, if she survives to the end of the period, she will be 'endowed' with the face amount when she reaches age 55.

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