With Profits Endowment
A with profit endowment policy is where a life assurance company agrees to pay its client a fixed amount (Called the amount assured) at the end of a fixed term determined by contract and providing that the premiums have been paid. The final amount will include any profits accumulated from the money. These profits are declared annually and are paid to the assured person when the contract is finished. In the result of death by the policy holder, the money will be paid directly to his estate. The policies are normally paid for monthly. The life assurance companies use most of this money to invest and then share the profits with their policy holders each year. In effect, the policy holder is taking a share of the life assurance companies profits from wise investments
Bonuses are as follows:
Reversionary Bonuses: These bonuses are declared annually as cash values computed as percentages of the basic sum assured and of bonuses declared in previous years. Once granted, these bonuses are guaranteed, cannot be withdrawn and are also known as attaching bonuses.
Special Bonuses:
These are one-off bonuses, granted at the discretion of the
life company and are also guaranteed. For example, if a friendly
society converts to a public company they may grant such special
bonuses to each policy in force, instead of issuing free shares
in the new company.