Glossary

Endowment

A life policy that pays its face amount on a set maturity date if the insured is alive, or at death if sooner; also the point when whole life matures.

Also called: endowment policy, endowment insurance

An endowment is a life insurance contract that pays its face amount either when the insured dies or on a set maturity date, whichever comes first. A 20-year endowment, for example, pays the beneficiary if the insured dies within 20 years and pays the owner the same amount if the insured is alive at the end. The word also describes the moment a whole life policy "endows," when its cash value reaches the face amount at the maturity age: traditionally age 100, or 121 on policies built on the 2001 or 2017 CSO tables.

Because the savings must equal the face amount in a short time, endowment premiums are high. Hypothetical example: a $100,000, 20-year endowment might cost several times as much as a 20-year term policy for the same amount, with most of each premium building cash value.

Endowments were once popular for college and retirement savings, but U.S. tax law changed that. Under Internal Revenue Code Section 7702, enacted in 1984, short-term endowments generally cannot qualify as life insurance, so new ones are rarely sold today. A policy that endows can create taxable income if the payout exceeds the owner's basis, and many newer policies offer maturity extensions. Owners of older policies should check the maturity date; see section 7702 and, for the related tax term, modified endowment contracts and the 7-pay test.

Last reviewed October 4, 2026

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Related terms

Whole life insurance Permanent life insurance with fixed premiums, a guaranteed death benefit and guaranteed cash value growth, sometimes boosted by dividends. Cash value The savings component that builds inside whole life, universal life and other permanent policies, which the owner can borrow against or withdraw. Section 7702 The federal tax code section that defines which contracts count as life insurance, limiting how much cash value a policy can hold for its death benefit. Seven-pay test The IRS test that flags a policy as a modified endowment contract if premiums in its first seven years exceed what would pay it up in seven level payments. CSO mortality table The table of death rates state regulators adopt as the minimum standard for life insurance reserves, guaranteed values and tax-law tests.

Related insurers

Triple-S Vida (GuideWell) Puerto Rico's Triple-S Vida and Florida Blue's Florida Combined Life, the life insurers of GuideWell, the mutual parent of Florida Blue and Triple-S.