According to a recent report from the BBC, endowment policy holders are facing huge disappointment as the ongoing financial crisis and recession started by the credit crunch is causing the value of their endowment policies to drop by thousands of pounds.

Most endowment policies were taken out in the 1980’s over a 25 year period and so around 50,000 policies per month are current maturing.

When taking CeMAP training, endowment policies can take a lot of explaining as there are various different types that work in different ways, however, what it means is that by and large a borrower took out a mortgage on an interest only basis.  They pay the interest each month and also pay a monthly sum into an investment vehicle, which is hopefully to grow enough to pay off the capital of the mortgage at the end and hopefully more than that, so the borrower has a nice lump sum at the end of the mortgage term too.

However, these endowment policies are often share-based and with shares dropping as they are, chances are it will not be enough to pay off the mortgage, which leaves the borrower with a shortfall.

One customer to be affected is Dave Griffiths from Suffolk, who told the news provider: “Last year I was told that everything was fine. A few weeks ago I received a letter from them telling me that I was going to be about £4,500 down.”

If this situation affects you, it is best to get advice as soon as possible.  It is not the only option to sell the policity back to the life insurance company; it can be sold on the open market instead and earn more money.

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