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Do you have grounds for an endowment complaint

Do you have grounds for an endowment complaint?

Endowment mortgages are policies that were marketed on the grounds that they would pay off a person’s mortgage once the policy matured. The policy is intended to be a long-term investment whereby the homeowner would pay premiums into the policy – which was invested in funds and would mature over time – and then at the end of the policy’s term, the total amount would pay off the outstanding balance of their mortgage.

However, almost half of people who took out an endowment mortgage have found that not only will their policy not cover their mortgage, but they will be left with about a 25 per cent deficit which they will somehow have to pay themselves. As a result, endowment providers have had to write to thousands of homeowners when it became apparent that their policies will not have matured enough to pay out what was expected.

People who find themselves in this unfortunate position then have a decision to make regarding what to do next. They could surrender their policy back to the insurance company that provided it in the first place in return for a lump sum. This amount could be more than they paid into the policy originally, or it could be less. Either way, however, it will be less than the original projected sum.

Another option is to sell the endowment policy to a company that trades in them. These companies could offer to pay quite a bit more for a policy than one might get if they simply surrender it.

There’s also a third option. If a homeowner feels that they were mis-sold their endowment mortgage, then they could make an endowment complaint and get compensation. However, many are unsure as to whether or not they have had the endowment wool pulled over their eyes.

Before anyone can claim compensation, they need to show that they have legitimate grounds for an endowment complaint and have suffered financial loss as a consequence. A policy holder could have grounds for a complaint if the financial advisor they bought it through did not inform them of the risks involved - that the endowment value could go down as well as up - or that an endowment policy is a long-term commitment which will not pay out handsomely if cashed in early, for example.

Some people were also told that their endowment was guaranteed to pay off their mortgage, which is not true and is also grounds for a compliant. Buyers should also have been warned that their investment was tied to the stock market, which itself comes with risks, and financial advisors should check that there is reasonable expectation that the buyer will be able to keep up with payments and that they understand about any fees or charges which might be connected to the policy.

Other grounds for claiming compensation include the seller ensuring that the buyer would not be retiring during the term of the policy and would therefore be able to afford the premiums. Homeowners that were advised to cancel one endowment policy to take out another will likely have been mis-informed because they are long-term investments, and if the buyer’s mortgage is due to come to the end before the policy matures then this is also reason to complain.

Homeowners who decide to either surrender or sell their endowment mortgage should bear in mind that the life insurance attached – intended to repay the mortgage if they die during its term – will come to an end when they no longer own the policy. Therefore, if they need life insurance to cover their mortgage, then they should make other arrangements to replace it with new cover through their mortgage or insurance provider.

Disclaimer: Matthew Pressman writes for a wide variety of commercial clients. This article is intended for information purposes only and readers should seek additional information before taking any actions based on its content.

Do you have grounds for an endowment complaint? / Author: mpressman

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