What is a Endowment ?
An endowment investment is a long-term savings plan that combines investment and life insurance. In South Africa, endowment investments are often used for medium- to long-term savings goals, such as saving for a child's education, a down payment on a home, or retirement.
With an endowment investment, the investor makes regular contributions over a fixed period of 5 years. These contributions are invested in a portfolio of assets, such as stocks, bonds, and cash, selected by a professional fund manager. At the end of the investment term, the investor receives a lump sum payout, which is usually tax-free if the investment has been held for at least 5 years.
How does it work ?
An endowment life insurance policy works by offering the policyholder a payout at the end of a specified contract period, or a death benefit to their beneficiaries if the insured person passes away before the contract period is over.
When an individual purchases an endowment life insurance policy, they agree to pay premiums over a set term, which can range from as short as five years to up to 30 years or until a certain age. Part of the premiums go toward funding the policy's death benefit, while the rest is invested. The amount of the premiums typically depends on the policy's benefit amount and contract term, with shorter terms often having higher premiums.
At the end of the contract period, the insurance company pays out the face value of the policy to the policyholder, either as a lump-sum payment or a series of instalments, depending on how the policy is structured. If the policyholder passes away before the end of the contract period, their beneficiaries receive the payout instead.
Benefits of endowment investments in South Africa
Investment fund priced and traded in units representing a mix of shares and investments, enabling diverse goals across various time frames.
Group Retirement Annuity
Companies set up Group Retirement Annuity Plans for the benefit of their employees when they are looking to retire.