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How to Purchase Insurance Bonds such as Endowments and Broker Funds

By Brown Ezilon.com Articles Published 07/2/2011 | Bond Insurance

Endowments are generally related to mortgages and have been under the spotlight recently due to the low returns they have generated. Higher returns had been promised a couple of years ago and recently bond holders are being notified that their policies will probably not generate sufficient sums to pay off the mortgage when it becomes due.

Apart from the bad publicity around insurance bonds and notably endowments they still remain a fair means to invest considerable amounts of money in. The best way to invest is by taking the form of a one off lump sum investment in a ten year policy. These forms offer profits and unit linked types, the difference being an end of term bonus with the profits made, which should end up being substantial.

You can even find and purchase second hand endowments as there is quite a market for these policies, which can actually be quite a good investment. These second hand policies are bought for a lump sum unless it has been paid up you will then have to continue with the premium payments until the policy reaches maturity. The life insurance element will continue on the life of the original investor and you can get an earlier pay out in the event that the person you bought the policy from passes away. However, you will need to keep in touch with this person to know if this indeed happens. You can also invest in second hand endowments using a specialist investment trust; this will help you stretch out the risks.

Maximum investment plans are really endowment policies and not anything different. There are other maximum savings plans that are the same with the slight difference that they have regular monthly contributions and not a lump sum.

You will find many stockbrokers and independent financial advisers offering broker funds to their clients. These kinds of investments are meant for life insurance companies, where brokers make the allocation for you over the individual funds.

Investments were once fettered to the funds of the life company once had chosen. This meant that the funds were very similar to funds of funds investments, the only difference being that in that case it is the life company that makes the allocations. Nowadays many of these funds are unfettered; this means they allow investing in different life companies offering funds, individual shares and unit trusts.

The advantage to be had for broker funds is that the IFA/broker has more expertise in the decision for the allocation, which should allow for compensation due to higher costs.