The life insurance industry is maddeningly complex. In the past, there were just a few forms of life insurance: term life, whole life and permanent life. These days, a wide variety of more complicated forms of life insurance have cropped up to encourage public consumption of long-term financial-protection products. Unlike term life or whole life insurance policies, these newer products are governed by complex mathematical equations that may be difficult for laypeople to comprehend.
Those who purchase complicated life insurance products must take the time to research and understand them. While outright fraud is relatively rare in the life insurance industry, it's not uncommon for smaller providers to mislead or misdirect prospective policyholders. If you're looking to obtain an innovative life insurance product that appears to offer tremendous upside potential with little downside risk, seek the advice of an impartial expert before closing the deal.
Like many consumers of insurance, you would probably welcome a policy that pays out in multiple circumstances. Of course, there are several old-line policies that do so. Whereas a term life insurance policy will issue a payout only after its policyholder's death, a whole life insurance policy steadily appreciates in value and may be "cashed out" at virtually any time. As a whole life policyholder, you'll be eligible to redeem your policy for cash after a certain period of time has elapsed. After a longer period of time, you may be able to turn a tidy profit on your investment.
However, whole life insurance policies typically cost several times more than bare-bones term life insurance policies. If you're looking for a cheaper way to maximize your life insurance investment, you may be forced to take out a more complicated type of policy. When you're ready to take the plunge, you'll have a clear option at your disposal: endowment life insurance.
An endowment policy functions as a three-way hybrid between term life, whole life and life assurance. Like a term life policy, an endowment policy has a fixed term. Like a whole life policy, an endowment policy accrues a cash value that can be disbursed after a certain "maturity" date. For short-dated endowment policies, this is typically the expiration date. Longer-dated endowment policies may offer the option of a pro-rated payout before their expiration dates.
An endowment policy may also pay out in the event of a catastrophic injury. In this way, endowment life insurance resembles the life assurance products offered by such companies as Aflac and Geico.