Business, Legal & Accounting Glossary
A term used in conjunction with policies such as low-cost endowment assurance and low start endowment assurance.
These sorts of policies operate on a ‘with-profits’ basis and often in conjunction with repayment of a loan or mortgage. If the policyholder dies during the term, a guaranteed death benefit repays the loan.
However, to guarantee to pay the entire loan at maturity would incur very high premiums. Accordingly, a policy with lower premiums guarantees to repay only a proportion of the loan amount at maturity (the basic sum assured). The expectancy then is that the balance will be repaid out of reversionary and (possibly) terminal bonuses.
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This glossary post was last updated: 26th April, 2020 | 2 Views.