What is an endowment policy designed to do?

An endowment policy is designed to provide a lump sum payment after a specified period or at a particular age, which is why the correct answer is focused on this characteristic. Endowment policies combine life insurance with a savings plan, ensuring that the policyholder or their beneficiaries receive a payout either upon the policyholder's death or upon reaching the end of the policy term. This makes them distinct from pure life insurance policies, which only pay out upon death, and other options that may focus solely on specific events like critical illness or lifelong coverage.

The ability to accumulate a cash value over time, which can be accessed during the life of the policyholder, is a significant element of endowment policies. They are often used as a means of saving for future goals, such as education or retirement, as they not only provide protection but also facilitate savings.