Once you receive more than one offer for your endowment policy, it is tempting to compare only the final figures. However, each offer is based on what the buyer sees in your policy contract, and understanding those same details puts you in a stronger position to judge whether a price is fair. That said, before accepting a buy-back insurance policy offer, taking time to read through the key sections of your contract can help you see what the buyer is paying for and what you are giving up.
The Policy Schedule
The policy schedule, usually found in the first few pages, summarises the basic terms of the plan. It is the starting point for any valuation, so it helps to note details like these:
- The policy start date and maturity date, which show how many years are left.
- The sum assured or basic maturity amount.
- The annual or monthly premium and the premium payment term.
- The name of the life assured and the policy owner, which may differ.
- Whether the policy is participating, meaning it is eligible for bonuses.
- The policy currency, especially for plans held in a foreign currency.
Guaranteed and Non-Guaranteed Values
Most endowment contracts separate values the insurer is committed to paying from those that depend on future performance. Buyers pay close attention to this split, so look for items such as these:
- The guaranteed maturity value and guaranteed surrender values by policy year.
- Reversionary bonuses already declared, which are usually added to the policy once announced.
- Projected terminal or maturity bonuses, which are not guaranteed.
- The illustrated returns at different investment rates, if included in the benefit illustration.
- Any policy loans taken against the cash value, which reduce what a buyer will pay.
Premium Status and Payment Terms
Buyers of endowment policies for sale take on the remaining premiums, so the contract’s payment terms directly affect what they are willing to offer. When reviewing this section, check details like these:
- How many premiums are left to pay and when the payment term ends.
- Whether the policy is fully paid up, which can make it more attractive to buyers.
- Grace period rules and what happens if a premium is missed.
- Any premium holiday or reduced paid-up options available under the contract.
Riders and Attached Benefits
Many endowment plans come with add-on riders, such as critical illness or premium waiver benefits. These can affect both the sale and your own coverage, so look for points like these:
- Which riders are attached and whether they end when the policy is transferred.
- Whether rider premiums are included in the total premium amount.
- Coverage you may need to replace once the policy is sold.
- Any benefits already claimed under a rider, which may affect the policy’s value.
Assignment and Ownership Clauses
Selling a policy usually involves assigning ownership to the buyer. The contract and the insurer’s requirements determine how this works, so it is worth checking points such as these:
- Whether the policy allows absolute assignment to a third party.
- Any nominations of beneficiaries that need to be revoked before transfer.
- Documents the insurer requires to record the change of ownership.
- Whether the insurer charges an administrative fee for the transfer.
Matching the Contract to Each Offer
With these details noted, each offer becomes easier to assess. A practical approach is to compare every offer against the current surrender value, the guaranteed maturity value and the remaining premiums, and to ask each buyer how they arrived at their price. Offers that seem far above or below the others may reflect a different reading of the bonus history or remaining term.
Reading Before You Sign
An endowment policy contract contains the information every buyer uses to price an offer, from the maturity date and guaranteed values to remaining premiums and assignment terms. Reading these sections yourself, and seeking advice from a licensed financial adviser where needed, can help you compare secondary-market offers with confidence.
Reach out to Conservation Capital to request a valuation of your endowment policy today.
