The traded endowment policy (TEP) market thrives because thousands of individuals choose to sell their policies each year rather than surrender them. Originally, most endowment life insurance policies were set up for a 25-year term. However, a significant portion of policyholders opt to cash in their endowments before maturity.
Often, the surrender values offered directly by insurance companies fall short of the true market value of these policies. This gap creates an opportunity for investors who actively seek traded endowment policies to diversify their portfolios. The TEP market efficiently connects individuals looking to sell their endowment policies with investors seeking to purchase them.
Back in 2003, government estimates indicated that a substantial number of endowment policies were unlikely to fully cover the mortgages they were intended for. Since then, many affected individuals have explored options such as re-mortgaging, seeking professional financial advice, or pursuing compensation. However, a considerable number hadn’t addressed their endowment shortfall.
Typically, individuals had a limited timeframe to file complaints after receiving their initial notification of a potential shortfall from their insurer or lender. Industry regulations often prevented insurers from addressing complaints submitted after this deadline. Experts highlighted a specific year as a peak for endowment policies reaching maturity.
Endowment policyholders can explore selling their policies strategically, potentially securing a more favorable outcome. The selling process typically begins when the policy owner engages with TEP brokers. The broker then forwards the relevant details to traders, who work to secure a price that exceeds the current surrender value offered by the insurance company. These services are generally offered without charge or obligation.
Reputable brokers strive to present offers that surpass the existing surrender value provided by the life office. If the policy owner decides to accept the offer, they complete an acceptance form and return it to the broker. Following the receipt of the acceptance form, the broker verifies the policy details with the life office. The policy is then placed into a portfolio with other policies, ranging from a few to several hundred. Once the policy is allocated to a portfolio, the sale is finalized promptly.
The endowment selling process can be straightforward and secure when conducted through a Financial Conduct Authority (FCA) authorized and regulated organization.