List and explain three types of endowment policy.

Answer Details

Three types of endowment policy

1. Pure (ordinary) endowment policy: Under this policy the sum assured is paid on the death of the life assured within the term or on his survival to the end of the fixed term, whichever comes first. It combines protection with saving and is the basic form of endowment.
2. With-profit (participating) endowment policy: This is an endowment under which, in addition to the guaranteed sum assured, the policyholder shares in the profits of the insurer through bonuses added to the policy. It pays a larger amount at maturity but attracts a higher premium.
3. Without-profit (non-participating) endowment policy: Under this policy only the fixed sum assured is payable at death or maturity, with no share in the insurer's profits. Its premiums are lower than those of the with-profit type.

Other recognised forms include the joint-life endowment, taken on two lives (for example husband and wife) with the sum payable on the first death or at maturity, and the double endowment, which pays twice the sum assured on survival to maturity but the single sum on earlier death.