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Letter L

Low cost endowment

The most common form of endowment policy used to repay a home loan. It is a mix of full endowment and term assurance designed to provide full life cover in the event of death during the loan period.

If investment returns are high enough it should also provide sufficient funds to repay the loan at the end of the term and ideally provide the borrower with a tax-free cash surplus.

It is not guaranteed to pay off the loan and that any shortfall will have to be made up by the borrower.
These types of endowments are increasingly producing poor projections due to the low rates of return being attained by the industry at the moment.