A Guide To Life Insurance - The Versatile Endowment Policy - Example ....

 

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The Versatile Endowment Policy - Example...

Mr and Mrs Darrell are determined to provide their son with a good private education. As soon as he is born they decide to take out a plan to provide £211,500 a year over the five years when he is between the ages of 13 and 17.

The plan involves five policies, all with profit endowments on Mr Darrell's life.

Each is a dated policy maturing respectively after 13, 14, 15, 16 and 17 years. The sum assured on the first is £2850, on the second £2800, on the third £2780, on the fourth £2750 and on the fifth £2725. The annual premiums for the first 13 years total £2300 gross, £2247.

50 net, and the total net outlay in premiums is £23,714. Each maturing policy will produce, on current reversionary bonus rates, £211,500.

Provided terminal bonus also continues this will add about another £3000 to the proceeds of each policy. Thus, the net outlay of £23,744 has produced sums totalling £27,500 for fees plus another £2750 (terminal bonus) which will go some way to meeting inflation. see http://www.telegraph.co.uk/comment/personal-view/3620108/Hey-I-should-be-drinking-bubbly-with-a-handsome-woman-in-a-hood.html

The 50% saving effected here results from the very long period for accumulation. The shorter this deferred period, the lower the saving will be, but even over a few years it may still be worthwhile. Making useful provision over a shorter period also necessarily involves a larger annual investment. Over very short periods such as one to four years, life insurance can be of little help, though those with large incomes may still derive some benefit from investing for fees payable later in the child's life.


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Even if private education is not being considered, thought should be given to the costs of a course at university.
The parental contribution required from those with more than modest incomes is now substantial. The assessed maintenance contribution can impose a large demand on the parents' net income. Advance provision through endowment policies can reduce this burden.
Often a child's grandparents may be major contributors to a school fee plan, and here capital transfer tax can be a........ see: click here for Married Women's Property Act


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