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Endowment assurance is a certain type of life insurance that, under most circumstances, pays a beneficiary when the policyholder dies. Some endowment assurance policies also will pay out if the policyholder has a critical and severely debilitating illness or an illness from which he will soon die. Unlike other types of life insurance, this policy has a maturity date and, if the policyholder is not dead when the policy matures, he can surrender the term for the value of the policy. The policy also can be surrendered before its maturity, but this will usually decrease the amount of money the policyholder gets.
An endowment assurance policy is primarily life insurance, which means the value of the policy is paid to a beneficiary when the policyholder dies. The policyholder is able to name a single beneficiary or, if no one is named, the money may go to the next of kin. When this assurance pays a beneficiary, it pays the value in one lump sum.
As a form of life insurance, endowment assurance usually pays on the death of the policyholder. Some policies, depending on the issuer and circumstances, may pay if the policyholder suffers critical injuries or an illness. If the policy does pay under these circumstances, the illness or injury typically needs to impair the policyholder’s mind, so he is incapable of reasonable thought, or affect him in such a way that he has only a short time to live. Unless this is specified in the policy, however, it will not pay regardless of how sick or injured the holder is.
Unlike most types of life insurance, endowment assurance has a maturity date. The maturity is typically from five to 20 years after the policy is taken out, depending on the premium and the total value of the policy. When the assurance reaches maturity, the holder can either keep the policy going by paying more money and making it more valuable, or he can turn it in for the value of the policy. Even if the holder is not dead, he can receive money by surrendering the assurance.
If the holder needs money or does not want to hold the endowment assurance anymore, he can surrender the policy at any time, even before maturity. When the assurance is surrendered prematurely, the holder will not receive the full value of the policy but will get a pro-rated amount. The holder will typically get less money than what he paid into the policy, however, so early surrender is uncommon.