How to sell an Endowment Policy Secondhand

How to sell your endowment

No surrender Andrew Oxlade, This Is Money 5 September 2003 (extract)

Falling stock markets combined with high charges have left millions of homeowners with a shortfall on the savings policies they hoped would pay off their mortgage.

But cashing in endowments is often the worst option, say financial advisers. Instead policyholders are attempting to sell them on for a better price to investors. The market has blossomed since last autumn when life insurance companies, who provide the policies, were ordered to tell policyholders of the option to sell on their plan.

Endowment policies, supposedly low-risk savings schemes which also give life cover, were heavily promoted in the Eighties as a way of paying off your mortgage. However, the recent slide in share prices has exposed the high fees and failings of some of these policies.

Most policyholders accept the only options are to either pay in more, in an attempt to bridge the gap, or to 'surrender' - cash in - the policy. But the third option is to sell the policy on the open market. The traded endowment policy (TEP) market exists because there is normally a gap between the surrender value your life office offers and the policy’s true underlying value. Dealers reckon they can give you an extra 10% to 15% on policies.

The bad news is that investors are choosy. They will snap up policies of large firms with good track records and steer clear of those that are languishing.

David Carrington of Policy Plus, a firm that deals in TEPs, says Pearl, NPI and London Life are untouchables because of the uncertainty surrounding their Australian parent company AMP. 'Investors don’t want to know if a company has investment performance worse than the norm or if the company won’t reveal anything about performance,' he says.

Carrington cites bad performers Alba Life and Guardian Royal Exchange, and Eagle Star which 'won’t tell you about performance'.

Others policies are unwanted for more noble reasons: because the surrender values they offer are closer to the true value, leaving little incentive for investors. Carrington names Commercial Union and Legal & General.

He says the policies in most demand are those from the largest companies that have performed well. He says the most popular are Norwich Union and Standard Life, which has issued 25% to 30% of all policies thanks to its tie-up with mortgage giant Halifax in the Eighties.

To be eligible you must have a policy that:

• is a with-profit endowment or whole-of-life.
• Not a unit-linked or pension policy has been running for at least one third of its full term or five years, whichever is greater
• has the latest bonus information available – ask your life office if you do not have an up-to-date statement
• has an up-to-date surrender quotation from your life office:
• approximately £1,000 minimum surrender value required

You could also challenge the dozens of smaller TEP brokers that are not in the APMM to beat any quote. Simply search for 'Teps' on any UK search engine. You are not obliged to take their prices – and the more you shop around, the better the price should be. But make sure a firm is regulated, which gives you protection. Check with the Financial Services Authority.

And remember that you also lose your life insurance cover. The cover remains on your life but pays out to the new policy owner if you die. You may therefore have to give names of 'professional referees' so morbid brokers can intermittently check you’re still alive.

Some traders only trade in policies from the following companies: Axa Equity Law, Axa SunLife, Clerical Medical, Commercial Union, Co-operative, Ecclesiastical, Friends Provident, General Accident, Liverpool Victoria, MGM insurance, National Farmers’ Union, Norwich Union, Prudential, Royal Liver, Royal London, Scottish Friendly, Scottish Widows, Standard Life, Weslyan

You could get more money for your policy by phoning this number - 0800 072 1972 - or by clicking this link here.