Selling Your Endowment Policy

If you're thinking about cashing in an endowment policy, make sure you consider selling rather than surrendering it.

If like many people you've become rather disillusioned with endowment policies - particularly if you have a mortgage-related endowment and you're facing a shortfall - you may be wondering what to do with it.

Thanks to excessive charges, falling investment returns, low interest rates and inflation, many endowment policies have generally failed to perform which means that when your policy matures you may not have enough to pay off the mortgage. Many policyholders have been able to claim compensation on the basis that they were missold the policy in the first place and most have been switching to repayment mortgages in their droves to ensure the mortgage gets paid off.

Although you can borrow against an endowment policy or make it paid up, you may want to consider surrendering or selling the policy. Be careful about doing this in the early years because you're unlikely to get back as much as you've paid in. It can take as much as seven years to break even and really you shouldn't surrender or sell unless the policy has been running for at least 10 years.

Your best bet is to find out how much the policy might be worth on the open market as you can often get far more if you sell it to a company that trades in 'second-hand' endowments. These are known as Traded Endowment Policies or TEPs, and the market makers who deal in them tend to pay better than your life insurer would if you just surrendered the policy.

You need to make sure that your policy qualifies though. It must be a 'with-profits' or 'whole of life' policy and it must have been running for at least a third of its full term or five years, whichever is the greater. You'll also need to contact your insurer to get hold of the latest surrender value - which must be at least £1,000 - and find out the latest bonus information.

Then, armed with the relevant information, get in contact with the Association of Policy Market Makers who will pass it on to its members. Any firm that is able to offer more than the surrender value should automatically get in contact with you at which point you can compare offers.

Alternatively, you could auction your policy through a company called Foster &Cranfield which deals with the sale and purchase of financial assets on a weekly basis.

Whatever you decide to do, you really should think hard before selling. After all, there wouldn't be a market for Traded Endowment Policies if buyers didn't think they were worth investing in.

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