Endowment misselling was common in the eighties and nineties and did not attract the regulators attention until the guarantee was withdrawn. People bought in to endowment policies because they were led to believe by an IFA (independent financial advisor) or other salesman that it was the best and most popular way to pay off?their mortgage. Wrong.
In many cases these advisors were poorly trained and failed to tell the endowment policy holders about the risk element of their endowment mortgage investment.
Many people are surprised when they find out that their endowment policy is linked to a fund investing in the stock markets around the globe. Most people openly admit that they can't afford to be taking such a high risk when it comes to paying off the mortgage.
Despite these risks people continued to?invest in?endowment mortgages, largely because they were poorly advised by the people they trusted. Everything would have been fine but for the unfortunate set of events outside of the mortgage industry that played a big part in the failure of these particular investments. So naturally with the downturn in certain areas of the stock market, many endowment policies have dropped considerably in value.
Currently many endowment mortgages are expected to fall a long way short of the target amount needed to pay off the mortgage. If poor advice by agents of the life company has affected your policies expected performance, you are indeed a victim of the endowment shortfall crisis and are entitled to make a complaint and claim.
It wont cost you a penny to find out if you are eligible to make an endowment misselling claim for compensation and it doesn't matter if you no longer own the policy, you can still claim.
You could stand to make a substantial amount depending on your endowment policy. Start your claim today before the time bar says you're to late.
The average endowment claim is worth around ?5000 but in some cases this figure can rise to as much as ?30000 or more depending on your particular situation.
The reason so many people bought them was because home loan firms and middlemen such as estate agents earned large commissions for selling. The charges tend to be front-loaded meaning most of it is paid up front and therefore, for several years you will receive little if anything back if you have to stop paying the premiums.
In theory, these policies can grow to more than you need to repay your mortgage, giving you a bonus to spend on anything you like. In practice, this has rarely happened in recent years and of the 8.5 million endowments in 2004, 6.8 million were not expected to clear the mortgage they were originally intended to pay off.
With an endowment mortgage, you do not repay any of the capital you borrow during the term of the loan. Alternatively, the endowment policy should grow to produce a lump sum which is large enough to repay the loan in full at the end of the pre-agreed period of, normally, 25 years.
The monthly payments consist of interest on your mortgage loan and the premium for the endowment. Within the package you also pay for life insurance which will repay the loan should you die. However, there is no guarantee your endowment will pay off your mortgage.
When the time comes to making a decision on stopping an endowment and surrendering it, it is important to check your policy and make sure there is some value in doing so.
Early redemption can result in making less than you would have if it carried on for its full term. However, if you need the money, this could be our only solution.
Continuing to pay money into a poorly performing investment could be throwing away hard earned cash.
As well as surrendering it back to the company from whom it was bought from, policyholders also have the option of selling to a third party.
This can also have the added benefit of getting more for your policy than you would if it were sold back to the original issuer.
Different companies will have different requirements when it comes to them buying your endowment.
Usually they would require it to be with-profits or a with-profits whole life policy and have been running for a minimum number of years (the number of depending on the company).
Some will also require a surrender value of at least ?1,500. If your policy does not meet the criteria, they will not be able to handle your sale. This would mean the only other option available is what the policy issuer will offer.
The Association of Policy Market Makers (APMM) is the industry body for firms specialising in the buying and selling of endowments. An independent financial advisor could also be helpful in comparing offers and helping you get the most for your policy.
There will be a fee for the work, but it could save you time and energy and also help you achieve the best possible price.
Don't forget how important your endowment policy is. Like with an investment, you should not suddenly cancel the policy without doing the appropriate research and taking the adequate financial advice.
If you stop payments on a policy, you may lose any life assurance cover that was offered to you. This is an important consideration for your dependents if you are then taken ill or were to die without having set up an alternative method of paying off the policy.
On average around half of the total payout on an endowment if you don't sell will come on the very last day. This is the so-called terminal bonus and it is not guaranteed. Stop paying in before then and you are likely to lose this. Instead, you will get the benefit of only the annual bonuses added to your policy.
Both Shaun Boy & Michael Challiner are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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