Why Do Endowment Policies Sometimes Result In A Shortfall?

Because endowment policies are invested mainly in the stock market, which is by its very nature volatile, if that market fails to perform as well as predicted - as happened with many endowment policies taken out in the early 90s - the policy may not make you enough to pay off your endowment mortgage at the end of its term. Obviously, the more wild and ambitious the predictions made by the person selling you the policy, the greater the danger the actual performance of your investment will not be able to measure up. Of the 8.5 million endowment mortgage policies currently in existence in the UK, 7 million are predicted to have a significant shortfall when they mature. Shortfalls might be as high as 25-50% of the value of the policy and the average shortfall is forecast by some financial experts to be as much as £10,000.

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