Selling Endowments

2007-03-08 10:33:40

( Business )



Endowments in General
An endowment is a form of insurance. It is an insurance which covers your life, and is paid for over a specific term. This term can be from fifteen to twenty-five years, or even more than that, depending on the company. If you die before the term expires, death benefits will be paid to your beneficiaries. If you survive until the end of the term, you will be paid the face value of the policy. When the term of an endowment ends, the life insurance coverage terminates as well.

The Use of Endowments
Endowments can be used a form of forced savings. Since your policy will lapse, and eventually expire, if you do not pay on time, you will be motivated to continue payments. Endowments are also particularly useful when taking out loans. Endowments can be used as a form of security for the loan, or as a strategy to enable repayment of interest-only loans.

Selling Endowments
In order to succeed at selling endowments, you must be aware of the advantages of an endowment policy. You must also be able to perform specific calculations that will tailor the policy to the needs of your prospect. These will be explained below.

Endowments as Repayment Strategy
Acquiring an endowment is an excellent strategy to repay interest-only loans. An interest-only loan requires payment of only the interest during the term of the loan. When the term ends, the entire principal becomes due. Since an endowment pays the face amount of the policy upon its maturity, you can purchase an endowment that will mature at the same time the interest-only loan principal becomes due. In this manner, you have ensured that the loan will be paid without serious damage to your existing funds. The endowment can also function as security, because the loan company can require you to name them as beneficiaries to the extent of the value of the loan. This will ensure them that if anything happens to you, they will still get paid.

Endowment Misselling
When selling endowments, it is the duty of the insurance agent to make sure that the endowment properly fits the needs of the client. If you sell an endowment to someone, and it fails to cover the amount of an interest-only loan, you can be accused of endowment misselling. It is vital that every insurance agent know how to consider the needs of the client.


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