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What are the benefits of an endowment life insurance policy?

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Quick Answer

Some of the benefits of an endowment life insurance policy include no risks on investments or interest rates and no required medical exam. These policies enable the policy holder to effectively save for his children's college costs, and it provides two products in one, explains Investopedia. Policy holders can also choose how much they want save each month and the specific date that the policy matures.

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Full Answer

An endowment life insurance policy is a combination of a term-life insurance policy and a college savings product, explains Investopedia. The payout, or endowment, when the policy matures is based on the amount of the monthly contributions. Investors can use the endowment for college costs, including living expenses, and if the policy holder dies before the policy matures, the child becomes the beneficiary of the payout.

Due to the risk-free nature of an endowment policy, it often offers small returns that may not keep pace with inflation.

Other potential benefits include the financial aspect of applying for college financial aid. For example, this investment does not affect the student's eligibility for financial aid, says Investopedia. These policies allow parents to pay for their child's education over a long period of time, beginning when she is young, as a form of prepaid tuition.

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