SHORT of cash? Well, aren't we all. But if you're tempted to give your flagging finances a short-term boost by raiding longer-term investments think again.

Denise and John Phillips haven't had a proper holiday since their nine-year-old daughter Katy was born. ``This year we promised ourselves a real break, the question is, how to pay for it,'' says Denise.

``We wondered about cashing in our mortgage endowment policy. At the moment it's just one extra thing to pay out on, and we've read that endowment policies aren't always a good thing. Our insurance company said we could get just over #5400 by cashing it in. Shall we do it?''

My answer to Denise is a definite ``no''. That life insurance policy is designed to pay off their mortgage in just over 11 years and, quite frankly, they'd be mad to cash it in now.

To begin with, the surrender value they've been offered represents only half the policy's real worth. It was started back in 1983 so it still qualifies for tax relief. Bonuses have been added each year and, on paper, it is now worth more than #11,000.

By my reckoning they've enjoyed a yearly growth rate of around 16% since it started. Although growth is unlikely to be as good in the future - investment returns have dropped in recent years - Denise and John should still have a very valuable investment by the time the policy matures.

And without it, they would have to find another way of paying off their mortgage.

The bad publicity surrounding endowments has centred on shorter-term policies. Lower bonus rates have meant substantial reductions in the yearly returns on 10-year plans - down to between 10% and 12% this year rather than the 15% to 17% for those maturing back in the eighties.

But maturity values of 25-year policies, those typically associated with mortgages, are looking better this year than last, with the leading companies - Royal Life, General Accident, Commercial Union and Standard Life included - all producing average returns of more than 13%.

Insurance companies can only guess at future maturity values using rates of growth set by the Personal Investment Authority. This is to stop them overstating possible future values. These rates are set at 5% or 10% a year. It is important to remember that these are not forecasts - growth could be much more or much less.

At 5%, Denise and John would be looking at a maturity value of #18,600 - enough to pay off their #17,000 mortgage with #1600 left to spend. At 10% the figure could be #24,800. That would give them an extra #7800, as well as paying off their mortgage - a far cry from the cash-in value they're being offered, even allowing for inflation.

Because Denise and John asked Scottish Amicable for a surrender value that is all they got. The company doesn't automatically provide information about other options - and neither do many others.

So they weren't told they might be able to make their policy ``paid up''. That wouldn't produce any extra cash now, but it would mean they could stop paying premiums, saving them just over #23 a month - and they'd still get a lump sum when it matured. At 5% growth the maturity value would be #11,700, rising to #15,300 at 10%.

Another option would be to take a loan against their policy. Insurance policy loans are usually much cheaper than personal ones from a bank. The 9% charged by Scottish Amicable is just about half the cost of a typical bank loan.

An added advantage is that interest alone is payable on the loan - the amount borrowed can be repaid from the policy proceeds when it matures - which keeps the monthly repayments down. And by making their policy paid up or borrowing against it, they retain the life cover it provides.

But Denise and John may be barred from making their policy paid up or taking a loan because it is ``assigned' to their building society. This means the society holds the policy as security for the mortgage and has a first legal charge on it when it matures.

Lenders stopped insisting on policies being assigned in the late eighties. So while more recent borrowers can usually take up the loan option, it may not be so readily available to long-standing borrowers.

While it is never a good idea to cash in a long-term insurance policy, there are times when you may have no alternative - after becoming unemployed for instance, when there simply isn't enough money to keep it going.

``In these circumstances, it's in the policyholder's interests to get the best price for their policy, and that's where we come in,'' says Alistair Lightbody of Scottish Endowment Consultants (SEC) in Glasgow.

``We deal with around 17 different firms who are interested in buying unwanted endowment policies, and can usually get a better price than a policyholder who just approaches one or two firms.''

If Denise and John had decided to sell their endowment, SEC could have achieved a price of #7070 - more than #1600 above the surrender value they were offered.