Tracking an Endowment Policy

This is a not something that the UK version of Microsoft Money has built into it, and so is difficult to track without some sort of workaround.

Some people have done this in a number of ways, such as the following:
  1. Endowment contributions can just be tracked as debits from your accounts to an insurance company, "disappearing into a black hole" (i.e. as a standard expense category). When the endowment matures, create a large deposit that can be made into one of your accounts. This method causes a large income to appear in your account, which may cause other issues.
  2. If you really want to track things closely, get the policy document out and work out how much commission, insurance and investment is actually being paid (this could be a percentage amount of the monthly premium), and make your monthly transactions split transactions. In this split, there would be a transfer to an endowment account (set this up as an asset, and add all bonuses to it), and at least two debits (insurance and commision).
  3. How about making an asset account equal to the maturity value of the endowment - good for funds going to completion, potentially inaccurate if they are not
What ever you do, make sure the monthly debits are in the bills/deposits area, either through your mortgage payment or as a separate debit. Then at least your monthly cash flow will be much more accurate.

If you cash in your policy early, then things can get really tricky - maybe the easiest way to solve that would be to subtract any cost or charge that you take to cash the policy in (option 2 above). If you don't track the value of the account (option 1 above), and only the debits, then this is a bit easier as you don't have to worry about it.

Category: Loans

Keywords: investment, premium, commission, insurance, endowment, loans