Can anyone remember Endowment mortgages?

[YNK]

Back in the 80's I discovered by accident that my parents had taken out life insurance on me without my knowledge.
Was that a normal thing back then?

No I wasn't a valued family member at all and was only on basic wages.
I hadn't lived near them for many years when I noticed it among some papers in their home.
They weren't very organised people financially and I know they later regretted the advice they had been given to take up an endowment and they switched back to a repayment mortgage. Nothing was ever said about a policy for me.

It wasn't my choice to have life assurance. It was a condition of your mortgage. I think the loan was 95% of the cost of the house so I assume the bank didn't want to take the risk of house prices dropping and not getting the money back if you died.

When we took out a mortgage in 1981, an endowment mortgage was offered to us alongside a regular repayment mortgage. Either way, the building society insisted that you had life insurance to cover the mortgage should one of you die. The monthly cost of the endowment mortgage at that time, including the life assurance element, was a fair bit under the cost of the repayment mortgage. But we read the small print. All of it. It said that the value of the endowment should cover the mortgage at the end of the 25 year term plus a bonus - BUT this was not guaranteed, it depended on how the investment performed, and it was possible that there could be a shortfall. So we opted for the repayment mortgage. And history has shown that it was a good job we did. I've often wondered how people got mis-sold endowments, as it was crystal clear to us that there was an element of risk. Having said that, my parents did very well indeed out of their endowment mortgages.

OP for starters I'm not sure your title has anything to do with your case, if your parents had life insurance on you that doesn't equate to an endowment mortgage, I can't quite figure out the connection.

Re the endowment mortgages themselves I was a mortgage advisor back then when they were introduced, in the branch I was in there were 4 staff intending to take mortgages in the near future, 2 male, 2 female, now I don't what this says about attitude to risk but the 2 men went for endowments while the 2 women went for annuity mortgages. I was one of the women obviously and just did not fancy the risk and there was a risk, it was in the paperwork but most people were swayed by the 'potential' returns highlighted. There was another more expensive option, the guaranteed payout option but practically everyone went for the low cost endowment because it was much cheaper. That said I had a few customers who held out to the bitter end when the mortgage ran it's term and they actually did get a surplus when terminal bonuses were added to the policy.

No it wasn't. When I was (mis)sold my endowment I was told that one of the advantages was that I wouldn't need life insurance. And this isn't me misremembering, I did a subject access request a few years ago and got all the notes they took and it was clearly what they told me.

My payment included both the life assurance element and the investment element, as was the case for others I knew at the time.

I was more than happy with my Endowment Mortgage. Makes a lot of sense if you understand it and work with it.

For me, I would never have taken out a mortgage without understanding what it was I was signing up to. I used to read the 'Money Supplements' in the 'heavy' Sunday papers. I got mortgage advice from more than one provider - including people who weren't trying to sell me their product.
I understood the "anticipated" return at the end of the policy was a figure worked out on the interest rates at the time, so clearly, when the interest rates I was paying on the mortgage started dropping, then obviously the interest rates on the investment side would be dropping too. So used the money 'saved' by no longer paying 15% interest on the mortgage, to start paying down the amount owed. SO, ultimately, when the endowment policy matured at a lower than predicted amount, it wasn't an issue, as the amount owed on the mortgage was much less too. That's how they worked.

The issue was, too many people signed up either without understanding that, or conveniently 'forgot' that. When interest rates started coming down, we had to do something to compensate for the fact interest rates on both investments and lending will go up or down together. You can't "gain" by no longer having to pay so much interest on the loan part, and expect the investment part to continue at the high rates that were there at the start.

@YNK while you obviously have issue with your parents. They have held an insurance policy on you.
I'm assuming they have passed away hence you are going through their papers.

What you need to do is find out what the status of the policy is. It may still be an active policy that will pay out to 'someone ' on your demise but that 'someone' needs to know about it and claim it.

It’s perfectly possible to take out an insurance policy on a third party if you have what is known as an insurable interest in them.

I’ve also known the scenario you describe. There was a good reason for it at the time but it was so long ago I can’t remember the actual details.

My parents died many years ago so all this is in the past with nothing remaining now. It was something that happened recently that sparked my memory and caused me to wonder about it.

Elphame, I wonder what an insurable interest would be although I had no financial or legal interest in anything they owned.

The insurable interest would be ensuring you had a funeral and as I said any time off work they needed to deal with your demise.
They couldn't have trusted your ex to make sure you got a decent send off.

If you have details of the policy it is worth chasing it up. It may be a 'paid up' policy that will pay out.

The really old one of my DGFs paid out, even if it took the insurance company a few weeks to dig into their paper archives and find it.

I would assume it was their way of making sure your children would be financially ok if anything happened to you. Maybe they knew deep down that your marriage wouldn't last and they insured you either to give the children a head start financially or to give themselves enough money to be able to give up work and care for your children full time. Unless the policy was for a very small amount and in that case I think it would just be for funeral expenses.

Another reason would be that if you had died they would be too grief stricken to work but would still need to pay their mortgage. I know someone who bought insurance for this reason in the 80s.

I honestly wouldn't think it was for any sinister reasons. People could take out insurance policies very cheaply in those days.

A lot of older type policies too were mainly savings vehicles with a small amount of life cover thrown in, they simply might have been doing the same as many of us do and having basically a savings account that we pay for example child benefit into. However of course not everyone can manage to keep up the payments for the required term and a lot of those were cancelled or lapsed long before the maturity date.

Thank you everyone who took time to comment.
You have all been really helpful.

They had a life insurance element built in as well!

i had an endowment policy but they were sending the bills to my solicitor instead so we never got the statements and they ended up paying out early. It didnt cover the mortgage but it paid of a chunk of it at the time.

You are not giving enough information for anyone to make a valid comment. Is it an endowment mortgage or an endowment assurance policy? To take out an endowment mortgage you would had to have been named on the mortgage.

For a plain endowmet assurance policy, if whoever took it out could show they had an "insurable interest" in your life then (at that time) they could insure you without your knowledge. They would be the beneficary on your death.

I remember endowment mortgages well but like PPS I think you may be confusing them with endowment polices

In the late 80s endowment policies could be bought and sold independently of whose life was insured irrc.

Do you know what? That is what was puzzling me - they already had a mortgage!
I only saw the policy for a brief second and although it wasn't directly referred to there was some vague hint made about endowment mortgage, although now you mention it, it was actually an assurance policy!

Yes. Had one, nearly cancelled it, persuaded to keep it on and it paid out. I may well have been one of the few to benefit from them.

Goodjob

Good information.