Life Insurance

Some savers are reluctant to open a life insurance contract because they feel they do not know the product well enough.

What is a life insurance contract?

A life insurance contract is a savings product that operates within an advantageous civil and tax framework that is specific to it. It is an asset that is said to be "non-inherited".


Upon death, it is not necessarily the heirs who receive the capital but the beneficiaries freely designated in the clause by the policyholder.

Confusion is often made with a death insurance contract which is a provident product.

Thus, against non-refundable contributions, the amount of which depends mainly on age, the beneficiaries of the contract receive a capital (or even an annuity) from the insurer in the event of the death of the insured during the period covered.

What is life insurance used for?

Life insurance is an envelope suitable for all stages of life. Its advantages in terms of transmission are indeed very important. In the majority of cases, each beneficiary benefits from an individual allowance of 152,500 euros on the transferred capital.

However, the investment has other significant advantages. It allows you to pay well on savings. The secure euro fund, specific to life insurance, is still a competitive medium (more than 2% for the best contracts) compared to other products guaranteed in capital such as the Livret A (0.5%) or the PEL (1%).

Beyond this guaranteed fund, popular with the French, life insurance also makes it possible to invest in the stock market, in real estate (“paper stone”), in bonds via the unit-linked support of contracts (even lower ).

In addition, to build up income with little or no tax, life insurance is also suitable thanks to very limited or no tax on withdrawals.

Who is the product for?

Life insurance is not just for patrimonial clients of a few large private banks. It is possible to take out a number of contracts from a few hundred euros.

As the investment's fiscal maturity is eight years in order to benefit from the best taxation during a future withdrawal, it is advisable to set a date as soon as possible, even with a small sum, in order to run the tax meter. In fact, it is not the payment dates of outstanding payments that count, but the date of the opening of the contract.

Are the savings invested liquid?

A life insurance contract is a fully available investment regardless of its length of service. To recover all or part of the funds, you just need to request it from your insurer.

He then has two months to pay you (art.132-21 of the Insurance Code). However, in practice one to two weeks is usually sufficient.

Confusion is generally made with the fiscal maturity of the investment, which is effectively eight years. After this period, the taxation in the event of withdrawal is even softer with, in particular, the benefit of an annual allowance on earnings of 4,600 euros (9,200 euros for a couple subject to common taxation).

What are the available investment vehicles?

Representing nearly 80% of life insurance outstandings, the support in euros has attracted savers. It has many advantages (capital guarantee, daily liquidity, ratchet effect) and no real alternative to investing exists to date.

The expected average return in 2019 is more or less 1.4% (without counting social security contributions of 17.2%). His compensation drops steadily in line with the historic drop in interest rates.

To offer potentially more efficient solutions, multi-support contracts are developing their financial offer by providing access to multiple investment solutions, called unit-linked in life insurance.

Funds invested in equities, real estate, trackers to replicate the performance of an index at low cost, the choice is now very wide on the most modern contracts.

This type of investment must take place over the long term because the capital is not guaranteed and the returns can be volatile. Also remember to monitor the costs, which depend on the media chosen (see below).

What are the charges applied?

Three main categories of costs exist in life insurance. The most visible costs are those that you bear when the contract is opened (and on each of the payments).

If today few are those who retain 4 or 5%, this level was almost normal in the early 2000s. Fortunately, there is room for negotiation. It mainly depends on the amount invested and the part devoted to units of account (UA). Internet contracts never charge for it. Annually, you bear management fees.

On the euro fund, they vary from 0.35 to 1%. However, they often go unnoticed, the reported performance being net of management fees. For the part invested in units of account, it is more expensive, count up to 1.2%. The Trophées d'Or du Revenu contracts charge an average of 0.7%.

During an arbitration between two supports, costs are retained. It is often a lump sum of several tens of euros or a proportional rate of a few tenths of a percentage that applies. Sometimes it's a mix of the two. Note, however, that more and more contracts offer at least one free arbitration per year.

Other costs should be analyzed, such as costs linked to delegated financial management (managed or mandated management), to a contingency guarantee such as a minimum guarantee or even the costs specific to unit-linked managers, which are often the most significant.

Each fund (stocks, bonds, real estate) has its own fees, which can easily reach 2%. Remember to check them (it may be necessary to look for the product sheet of the desired fund on the Internet).

What is the tax on a withdrawal?

For winnings generated by payments made before September 27, 2017, the classic rule applies. By default, the interest contained in the withdrawal is subject to the progressive scale of income tax (IR) or optionally to a lump-sum discharge (PFL) which changes according to the length of the contract: 35% before 4 years, 15 % between 4 and 8 years and 7.5% after 8 years.

For gains generated by new payments made since September 27, 2017, they are by default subject to the single flat-rate deduction of 12.8% (or even 7.5% after 8 years), regardless of the length of the contract. Income tax taxation is still possible, but it becomes optional.

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