An endowment policy is characterized by cash values that grow at a fast pace so the policy will mature or "endow" at a specified date.

An endowment policy provides a death benefit if the insured dies within the specified policy period. It can also be a living benefit to the policy owner if the insured is alive at the end of the endowment period. Because they build cash value rapidly, endowment policies are typically purchased to provide a living benefit for a future time. Many people use them for retirement funds or to fund a child’s college education. Endowment policies do not meet the income tax definition as a life insurance because they are designed to build cash stores for future use. Consequently, the endowment policies do not qualify for the favorable tax treatment that life insurance is given.