Three types of endowment policies

Unit-linked use contributions to purchase units in a managed fund. The returns are not guaranteed and are therefore not suitable for most home buyers.

Traditional with-profits invest in the insurance company's internal fund. These policies offer a minimum guaranteed sum on maturity plus bonuses. Usually, bonuses are added to the fund annually and there may be a terminal bonus. The value of these bonuses is up to the life company. With-profits policyholders should continue paying contributions after the policy matures to get the best value from the policy.

Unitised with-profits have a guaranteed annual growth rate each year. However, the final value is not set in stone and insurers severely penalise those cashing in a policy before it matures.