Was Your Endowment Missold?

2007-03-08 10:33:40

( Business )



Endowments
Endowments are agreements where periodic payments are made for a given term of years. These payments are invested in a fund so that the money saved will generate interest. When the endowment matures, the money, with interest, is returned to the owner of the endowment policy.

The Use of Endowments
Endowments are used as a means of generating savings, sometimes called forced savings, because endowment payments cannot be withdrawn. They are also useful because of the added benefit of life insurance during the period of the endowment. Endowments are also used in conjunction with mortgages, usually interest-only mortgages. In an interest-only mortgage, you pay the interest over the term of the mortgage, while separate payments are made to an endowment. The endowment's period will be concurrent to the mortgage, so that when the interest-only loan matures, so will the endowment. The endowment proceeds will then pay for the principal of the loan, and the excess will go to the owner of the endowment policy.

Missold Endowments
If the sales agent of the endowment policy failed to consider the suitability of the policy to your current need and financial situation, the policy may generate insufficient funds. Sales agents selling endowments are tasked with properly evaluating the financial needs of their clients. A sales agent must also disclose to you the risks of your policy and the predicted costs, restrictions, and exceptions to any protection the endowment will provide. If the endowment policy is insufficient, the loan principal might not be paid in full, leaving you vulnerable to foreclosure.

Missold Endowment Claims
Complaints for missold endowments generate large business for law firms and solo practitioners. The chance of recovery for a good case is high, and the proceeds will no doubt be large. Insurance companies are among the most liquid corporations in the world, so law suits against them for missold endowments are very attractive to lawyers. You must be very careful in picking legal representation; choose a lawyer who will agree to reasonable terms.

Identify a Missold Endowment Early
In order to protect yourself from the devastating effects of allowing a missold endowment to mature, have an expert examine your policy, along with any loan that it is securing. Compare the predicted value of your endowment at maturity, and the principal of the loan. If the figures are almost identical, have your policy examined immediately. It is best to have an endowment that yields a sum greater than the loan principal, as the sum of a matured endowment is always subject to fluctuation.


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