Endowment Insurance

The most usual combination in which pure endowments figure is technically known as endowment insurance. This policy is popularly referred to as an endowment. It promises to pay a certain sum to the insured in case he should die within the term of the policy or a like sum at the end of the term in case of survival. Analysis of this contract shows that it includes the pure-endowment feature just discussed and, in addition, insurance against death during the term of the endowment. For illustration, a five-year endowment-insurance policy issued at age 45 will pay the sum insured if the policyholder die during the first, the second, the third, the fourth, or the fifth years, and it will pay the same sum if he survive the fifth year. The cost of this insurance, therefore, will equal the following:

Contracts known as "semi-endowments" or "double endowments" are sometimes issued. They differ from the policy just explained only in the fact that the amount due in case the insured should survive the term of the policy (i.e. the endowment element) is one-half, or is double, the amount paid in event of maturity by death. The cost of a five-year semi-endowment insurance of $1,000 at age 45, therefore, would differ from the cost of the policy just computed only by the cost of the pure endowment, which in this case would be as follows:

69894/74173 X 500 X .862609 = $405.899442.

This amount, added to the cost of the five-years' term insurance, would give the net single premium for the semi-endowment.