Endowment mortgages are still amongst the most commonly used form presently available to borrowers.

These days it is not really possible for solicitors to provide advice on a choice of mortgage as most, if not all, clients give their solicitor instructions when the choice of mortgage has already been made.

Solicitors can, however, help their clients with endowment mortgages in other quite common circumstances.Endowment contracts are long term affairs, quite commonly lasting 25 years or more.

It is therefore no surprise that many such endowment policies do not run their full term.

It is not unknown for clients to decide to let policies lapse through non-payment or to seek to surrender back the policy to the life office.

It is here that a solicitor can aid his or her client.

No solicitor should allow any client to surrender his or her endowment policy without first checking to see if the assignment value is greater.Many solicitors can overlook the fact that a whole new market has recently sprung up in the sale and purchase of second-hand mid-term endowment policies.

Commercial investors have awoken to the fact that a mid-term endowment policy can provide a greater return than almost any other secure investment format currently available in the UK.

It is this security and high comparative return that has made such investors turn to dealing in endowments.This new breed of second-hand policy traders has enabled solicitors to assist their clients by offering them another way of disposing of their policies.For example, one policyholder with a large well known Scottish life company was offered a surrender payment of £17,493 but actually sold the policy to a second-hand trader, Absolute Assigned Policies Ltd of Edgware, for £26,300, some 50% more than that offered by the life office.

(Of further interest to solicitors is that this company also pays a 3% commission amounting to £798, probably more than most commonplace conveyancing costs!)Such examples are not confined to the Scottish companies.

Another example involved a well known English insurance company where the surrender value was £6608 whilst the same policy trader paid £9400, some 42% over the surrender value offered by the life office.

These examples are not isolated.

The position seems to be that if a life policy has existed for at least seven years, the endowment policy traders will be interested in making an offer; and one that is usually above the surrender value on offer from the endowment company.The cause for the disparity in the figures arises out of the commitment of the lif e companies to their long term policyholders who maintain and continue their endowment contracts right through to the end of their contractual term.

The main priority of the life offices is the financial benefit of these policyholders and this is reflected particularly in terminal bonuses.

When a policy matures, the life companies pay out a bonus on the termination of the policy term (see Prudential Insurance Co v IRC (1904) 2 KB 658).

These particular bonuses are both generous and normally a substantial element of the final payment made by the life office.

This being the case, the life companies take the view that their continuing policyholders must not suffer as a result of those seeking to terminate their endowment contracts early.Conveyancing solicitors will be familiar with an assignment deed for a policy of life insurance because of the common practice by lenders of requiring an assignment of endowment policies in connection with endowment mortgages.

An assignment entitles the assignee to receive payment under the policy (see Crossley v City of Glasgow Life Assurance Co (1876) 4 Ch 421).But what covenants, if any, should a seller's solicitor require in the deed for the protection of his or her client? There is really not much that needs to be covered so far as the seller is concerned and the deed can be in a very simple form following the brief provisions of s.5 of the Policies of Assurance Act 1867.

This contemplates a very simple format by way of an endorsement on the policy document.

Of course, the buyer will wish to impose covenants on the seller including a covenant that the policy is valid and in force.

If this is the case and the seller accepts such a covenant then the seller's solicitor must make quite sure that, at the time of assignment, all the premiums are fully paid.The buyer will want to give notice to the life office after the completion of the sale to complete the title and to enable the buyer to sue in its own name (s.1 of the Policies of Assurance Act 1867 and Re Turcan (1888) 40 Ch 5).

So far as the seller is concerned, the giving of notice has practical consequences in that, until notice is given, the life office will still consider the seller as the policyholder and will direct all correspondence and premium demands to the seller.

To avoid this inconvenience, the seller could seek to include a covenant in the deed requiring the buyer to give notice to the life office within seven days of completion.The trading of second-hand endowment policies is plainly a growth area of work and can enable solicitors to make real financial gains for their clients whilst also ensuring the possibility of earning commission that could exceed anything comparable from simple residential conveyancing.