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🎯 '''Pure endowment policy''' is a type of [[Definition:Life insurance | life insurance]] contract that pays a specified [[Definition:Benefit | benefit]] only if the insured survives to the end of a defined policy term — and pays nothing if the insured dies before that date. This makes it the conceptual inverse of [[Definition:Term life insurance | term life insurance]], which pays only upon death within the term. In actuarial and insurance terms, a pure endowment isolates the survival risk element, pricing the contract based on the probability that the insured will be alive at maturity, the [[Definition:Time value of money | time value of money]], and the insurer's [[Definition:Expense loading | expense]] and [[Definition:Profit margin | profit]] margins. Though rarely sold as a standalone retail product today, the pure endowment remains a foundational building block in [[Definition:Actuarial science | actuarial science]] and product design.

📊 When a policyholder purchases a pure endowment, they pay [[Definition:Premium | premiums]] — either as a single lump sum or over the policy's duration — and the [[Definition:Insurance carrier | insurer]] invests these funds, crediting them toward the maturity benefit. If the insured dies before the maturity date, the insurer retains the premiums paid (or, in some contract designs, returns premiums without interest as a death benefit, though this technically transforms the product into a modified endowment). The pricing relies on [[Definition:Mortality table | mortality tables]] and [[Definition:Discount rate | discount rates]]: the insurer effectively pools the mortality risk across many policyholders, using the forfeitures from those who die early to fund part of the payouts to survivors — a mechanism known as the survivorship benefit or "tontine effect." Under [[Definition:IFRS 17 | IFRS 17]] and other modern accounting frameworks, pure endowments are measured using probability-weighted cash flow models that account for both the investment component and the [[Definition:Insurance risk | insurance risk]] transfer, while under [[Definition:Solvency II | Solvency II]], the reserve calculation reflects the present value of the conditional payout discounted at risk-free rates with adjustments.

💡 Although few consumers would knowingly purchase a contract that pays nothing upon death, the pure endowment concept pervades the insurance industry through its role as a component in more complex products. The standard [[Definition:Endowment insurance | endowment policy]] — which pays at maturity or upon earlier death — is mathematically decomposed into a pure endowment plus a [[Definition:Term life insurance | term life]] element, and many [[Definition:Annuity | annuity]] and [[Definition:Pension insurance | pension]] products embed pure endowment mechanics in their survival-contingent payout structures. In markets across Europe, Asia, and Latin America where savings-oriented life products dominate, understanding pure endowment pricing is essential for [[Definition:Actuarial science | actuaries]] designing participating policies, unit-linked plans, and retirement products. The concept also surfaces in [[Definition:Reinsurance | reinsurance]] transactions where longevity risk is transferred, with the pure endowment framework serving as the analytical basis for pricing survival-contingent obligations.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Endowment insurance]]
* [[Definition:Term life insurance]]
* [[Definition:Annuity]]
* [[Definition:Mortality table]]
* [[Definition:Actuarial science]]
* [[Definition:Longevity risk]]
{{Div col end}}

Definition:Pure endowment policy - Revision history

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