The endowment surrender value is quite simply the amount of cash that the life office will pay out if the endowment policy holder decides to stop their endowment, and terminate the life assurance attached and cease all future premiums.

The endowment surrender value is very easy to obtain. All the policy holder has to do is phone the life office and request the "surrender value". Most life offices will give the surrender value over the phone. Some will require something in writing and may drag their feet a little..

The Financial Services Authority made it mandatory for all life offices tell the endowment policy holder that their are alternatives to surrendering their endowment policy, and one of the alternatives is to offer the endowment up for sale to a traded endowment buyer, who may pay a higher amount than the endowment surrender value placed on it by the life assurance company.

If a trader decides to buy the endowment policy as a going concern, and continue the premiums through to maturity, the policy will then pay out in full to the new buyer, unless of course the original policy holder (life assured) dies before the endowment matures, in which case it will pay out the guaranteed death benefit immediately to the new buyer.

So to be accurate, there are two possible valuation models:

1. The surrender value quoted by the life office that issued the endowment, or its successor, and which is calculated by the endowment life actuaries, and consists of a complicated and convoluted mathematical process with all kind of factors effecting the final outcome.

2. The "open market" valuation, which is what an investor is willing to pay for the endowment as a going concern, with the intention of continuing it on to final maturity.

If an open market valuation of the endowment policy returns a greater sum of money than the life offices endowment surrender valuation then it is difficult to see a reason why not to go with the greater amount offered.

 

 

"Selling endowment policies is no more complicated than surrendering endowment policies, but can often be more valuable."