A type of life insurance cover that pays out in full if you die during the term of the policy, or upon a set future date. Used in conjunction with endowment mortgages. An endowment policy is an investment plan that you usually pay into each month. Your money is invested in shares or bonds for example, with the aim of making it grow enough to pay off the original loan when the mortgage term ends.
The endowment policy is set up to grow enough to repay the amount borrowed at the end of the mortgage term, based on projection. As the policy is linked to investment market growth it is not guaranteed to pay off the mortgage at the end of the term, although if investment performance is strong it may pay out considerably more. The policy will also include a life assurance element which provides life cover for the total amount of the loan.