Selling Endowment Policies

If you have an endowment policy you took out thinking it would cover your outstanding mortgage, but now want to surrender it before the maturity date, then read on.

Although there was a lot of bad press about mis-sold endowment policies from the 1980s and 1990s, most people should have gone through the Financial Ombudsman to obtain a resolution to this issue. If you didn't and still have yours and are thinking of selling it, then here's what to do.

Cashing Endowment Policies

How Does The Sales Process Work?

Numerous endowment policy brokers will get your policy traded on the open market know as Traded Endowment Policies (TEP). The process to surrender a plan to a third-party before it maturity date has alternative names such as cashing in the policy.

Overall, the selling process works as follows:

• You need to locate all the details of your plan (see below).
• Either contact a broker or approach your existing insurance company for quotes.
• When you've decided on an offer that works for you, complete the acceptance paperwork.
• You'll usually receive the surrender value within three weeks.
• Once you've received your cheque, cancel all direct debits or standing orders.

You'll more like to get a better surrender value on the open market than your current insurance company - so shop around.

The brokers who undertake this work keep the policy open and use various tools to see how the plan may mature and offer you an amount which is usually higher than the surrender value proposed to you by the insurance company.

Almost all endowments also carry a life insurance element. Each year your insurer will send out a statement showing you various amounts including guaranteed components as well as yearly bonuses. The bonuses have reduced considerably in recent years due to the reduction in the stock markets and the general credit crunch and reduction in risk by the banks.

Most specialist brokers usually purchase with-profits endowments that have many years of guaranteed bonuses attached to them. You may not be able to sell other types of policies.

The surrender value changes daily especially for those endowments directly linked to the stock market (which were possibly sold as endowments but were actually savings plans invested in the stock market).

Finding Broker Offers

There are plenty of specialist brokers on the market who will quote you a value to sell your endowment policy to them. It's best to shop around and see who will provide the best quote for you. You'll need the following information at hand:

• Your insurance company name.
• Your policy number(s).
• The amount you pay into the policy each month.
• Any surrender values you have already received.
• Find your latest statement that shows all bonuses you've accumulated over the term of the policy to assist the valuation assessment.
• The original policy document providing information on life insurance.

Most of these companies are only taking policies that still have some maturity left, so if yours is less than five years old, it's unlikely you'll be able to sell it on in the second-hand market.

All these services should be free and contain no upfront costs. You should also check the terms of the sale to see if any commission payments need paying to the broker upon a trade.

Do You Have a Mis-Sold Endowment Policy?

All in all, the Financial Conduct Authority (FCA) estimate around four million people have mis-sold endowments with people believing it was guaranteed to pay off their mortgage. If you either need ready cash or now know it's not going to pay off your mortgage and need the money to make other arrangements, then why not see what your endowment policy is worth on the open market?

If you believe you have a mis-sold policy, then contact your insurance company in the first instance. If you don't get the decision you want, then contact the Financial Ombudsman Service who can mediate between the two parties.