Glossary of Endowment Terms

Acknowledgement of Assignment
This confirms that the insurance company has noted the assignment. After receiving notice, the insurance company takes 2-4 weeks to process the information. It sometimes happens, therefore, that the buyer has to pay subsequent premiums even though the Acknowledgement of Assignment has not been received from the insurance company.
Annual Bonus Declaration and Reversionary Bonus Balance Notification
The policy balance, consisting of the sum assured, annual bonus and accrued annual bonuses, is notified in writing by the insurance company once a year.
Asset Share
Asset share is the estimated value of the accumulated premiums paid under a policy, together with attributable investment returns and operating profits, less expenses and mortality costs.
Auctioneer
An Auctioneer is a firm which sells policies by auction on behalf of policyholders seeking to realise cash from their policy. The Auctioneer's income is derived from commission charged to the seller.
Contract Note
The contract note confirms the purchaser's agreement to buy the policy offered, paying the purchase price and taking responsibility for all future premiums up to the maturity of the policy concerned. All rights and obligations of the endowment policy are transferred on the date of purchase. The date of delivery of the policy documents is irrelevant'.
Current Accrued Bonuses
Total of reversionary bonuses declared so far. This figure would normally include any special bonuses declared. Market Makers and auctioneers need to know the total bonuses given on the policy; this will be found on your latest bonus statement. If this cannot be found, life offices will usually provide the information to policyholders over the telephone.
Date of Bonus Declaration
This will be the date on the bonus declaration statement sent to you. (frequently it is 31 December of a particular year) Death benefit: The amount that will be paid out on the death of the life/lives assured.
Deed of Absolute Assignment
This is a legal assignment by deed, to either an individual or a number of buyers. Joint ownership is sometimes recommended as this may avoid inheritance tax procedures in the UK if a co-purchaser dies. The last surviving co-purchaser is entitled to everything. Assignment to a minor is permitted by some life offices (if the premiums are paid by a third party) although minors are not permitted to resell.
Endowment
A regular savings policy which is a combination of life cover and investment. Can either be bought as a savings plan or be used to pay off a mortgage.
Formula Maturity Value
The Formula Maturity Value (FMV) would be the value of a policy at maturity if the current rates of reversionary and terminal bonus for a policy of the same original term were to remain unaltered.
Note:This is most unlikely to happen, but the figure is usually calculated by Market Makers as part of their valuation procedures.
Investor
An investor is a corporate body or individual who purchases a TEP for a capital sum, assumes responsibility for the payment of future premiums and is entitled to the proceeds of the policy on maturity and to the death benefit if the original policy holder dies before maturity.
Key Features Document
A Key Features document provides: general information explaining the nature of the product. specific information about a particular TEP Locked-In Value: The locked-in value of a policy is the aggregate of the sum assured and reversionary bonuses allotted to a policy.
Market Maker
A Market Maker is a company which makes a market in TEPs, using its capital or that of an associate company to finance the operation. Market Makers make their profit from the margin between buying and selling prices.
Maturity Date
Date the policy expires. Monthly / Annual Premiums: The amount paid on the policy each month or year. Notice of Absolute Assignment: Assignment to the new owner does not take effect with the insurance company unless notice is given. This is therefore notification of change of ownership of a policy.
Paid up
The premiums have been stopped but the policy still 'grows' and keeps running until maturity. Policyholder: A Policyholder is the current owner of a with-profits 'endowment' or 'whole-of-life' policy.
Policy Number
The number given to a policy by the originating Life Office. Pricing Discount Rate: Standard way of calculating the price of a policy for sale. It is the rate at which the Formula Maturity Value and future premiums are discounted to reach a price for a policy. Reversionary bonus: Annual bonus allocated to the policy. Once allocated, it cannot be taken away.
Start Date
The date that a policy started.
Sum Assured
An amount guaranteed to be paid out when the policy matures or on earlier (death) claim, providing that premiums have been paid in full. Surrender Value: The amount the Life Office would give you if you were to give up the policy. We need an up to date surrender value and this can be obtained from your Life Office.
Surrender Value Quotation Date
Date that the Surrender Value was given/sent to a policyholder. Terminal Bonus: The terminal bonus is a lump sum added to the policy on maturity; it is not declared until the policy matures.
Traded Endowment Policy
A Traded Endowment Policy (TEP) is a 'with-profits' policy which has been sold before maturity. Policies include both endowment and whole-of-life.
Unit Linked Policies
Premiums are usually invested as units in stock market funds. There are usually no guarantees and the value of the policy goes up and down in line with the performance of the particular fund.
Unitised With-Profits Policies
Premiums are used to buy units in the Life Company's fund. Companies operate funds in many different ways. Usually these contracts have lower guarantees than traditional with-profits policies.
With-profits
The policy gains from the investment profits of the Life Office?s with-profits fund by earning bonuses each year and at maturity.