Endowment Policy Law and Legal Definition

In insurance law, an endowment policy refers to policies that pay a lump sum amount on attaining maturity. An endowment policy usually covers a risk for a specified period of time at the end of which the sum assured is paid back to the policy holder. This type of policy is usually used in life insurance. In certain policies, a sum may be paid in case of critical illness. Under endowment policy, the policy holder can surrender the policy. In such cases the holder receives only the surrender value as determined by the insurance company.