With profit endowment

As with any endowment policy the sum assured (ie the amount payable on death) is usually equal to the amount of the loan. The term of the policy (ie the length of time the policy runs from start to maturity) is equal to the mortgage term.

Ideally, on maturity, the with profit element should provide a lump sum above the level of the loan, but the amount of surplus, if any, cannot be guaranteed.

Advantages:
• Generally considered to be a lower-risk than a unit linked policy.
• Bonuses, once added to the policy, are guaranteed provided the policy is kept in force to maturity.
• Could be considered to offer greater stability than an investment linked endowment.

Disadvantages:
• Generally more expensive than most other mortgage schemes.
• The savings element can be attractive for people who want to save for the period of the loan.
• A separate form of savings that is not tied into mortgage arrangements could provide a more profitable savings plan.
• Can be inflexible.
• If the borrower wishes to repay the loan early or it is no longer needed it will have to be surrendered or sold.
• In most cases surrender values can represent a poor return on the premiums invested.