Do not rush to sell your valuable endowment policy

ANOTHER endowment policy purchasing company has joined the small band of companies that will buy your second-hand policy at a premium and then sell it on to a third party, often by way of auction.

Policy Plus Ltd. is based in Blackrock, Co Dublin, and like the Irish Policy Exchange Company, the Endowment Policy Purchasing Company and the Endowment Exchanges Ltd, it will quote more favourable prices for your endowment policy than you will get if you were simply to cash it in with the original insurer.

The majority of with-profit life assurance-based policies sold here and in Britain are cashed in early and investors in such second-hand contracts are only interested in the with-profit policies (and not unit-linked ones) because of the way profit bonuses are added to the policy throughout the term. Terminal bonuses in particular often represent a significant amount of the overall value of the policy - the significance of which most original buyers do not fully appreciate when they buy the policy.

The poor surrender value of early encashed with-profit policies' is the reason why companies like Policy Plus and the others are in business. Because of the high potential value of the with-profit funds - funds that have already absorbed all the early costs and charges - there is no shortage of buyers.

Prices are good enough at auction and through private sale arrangements to both pay the seller a small premium encashment. value and reward the intermediaries, including third party brokers who are rewarded with a commission for bringing the business to the policy exchange company.

The arrival of Policy Plus Ltd, means good news for sellers, since it will have an even better opportunity to compare the encashment values on offer. Most companies prefer policies with at least seven years to run, and prices will depend on factors including the age of the seller and the size of declared bonuses.

You can trade in your policy very quickly - most of the traders will try to complete the deal and send you a cheque within 24 or 48 hours, but do not act too hastily. Early encashment, even with a premium price offer is always going to result in a financial loss because you are forgoing all the valuable future bonuses. If you are temporarily short of cash, contact your bank and see if it will allow you to borrow against the equity you have already built up in the policy fund. The insurance company itself may extend such a loan facility.

If encashment is the only solution, make sure to shop around for the best price. The following is a list of most of the policy exchange companies in operation.