Q&A – 16 September 2004
Question: How can I determine whether my client’s endowment policy is worth holding on to?
Answer: You will need to determine why the policy was originally taken out, and whether that purpose still exists. Also look at the expected returns to maturity and whether better results can be achieved elsewhere.
Often the client gets to a stage where insurance cover is no longer required.
Policies can be ‘paid up’, meaning no further premiums are payable, the policy lies relatively dormant and may accrue some lower level of bonuses until and/or at maturity. In this situation, the sum insured is reduced to reflect the fact that no future premiums will be paid.
Alternatively, the term or maturity date of endowment policies can usually be varied under an option to extend or reduce the period to maturity, subject to certain notice periods.
The outcome from paying up a policy or reducing the maturity date may be preferable to simply cashing in the policy, particularly where date to maturity is only one to three years.
Remember that on surrender, many providers will arrange replacement cover under a new policy with no underwriting requirements. The key is to ensure the replacement cover is available before surrendering or paying up the policy.
Justine Harris is head of professional development, Tribeca .
Got a question?
E-mail: [email protected]
Recommended for you
With the final tally for FY25 now confirmed, how many advisers left during the financial year and how does it compare to the previous year?
HUB24 has appointed Matt Willis from Vanguard as an executive general manager of platform growth to strengthen the platform’s relationships with industry stakeholders.
Investment manager Drummond Capital Partners has announced a raft of adviser-focused updates, including a practice growth division, relaunched manager research capabilities, and a passive model portfolio suite.
When it comes to M&A activity, the share of financial buyers such as private equity firms in Australia fell from 67 per cent to 12 per cent in the last financial year.
