While it is impossible to know exactly when or how his life will end, it is possible to prepare to protect the people you love after he leaves. Buying good life insurance can give you peace of mind knowing that your family can benefit from financial support after your death. However, it should be noted that this is primarily a savings product. By investing in life insurance, you can invest your money and build your capital.
What is life insurance?
Life insurance is a contract between the insurance company and the insured. This is a cover that is considered an investment, which allows you to save some money and then benefit from it. The insurance contract thus depends on the needs and objectives of the insured. However, two cases should be highlighted:
In the event of life: the insurance contract serves to provide protection over a given period (ten years). In this type of contract, the insured can be the beneficiary and benefit from the amount saved in addition to interest. It is an attractive life insurance investment.
In the event of death: if the insured dies, the beneficiaries mentioned on the contract can take advantage of the insurance premium. The money saved can be used to cover various expenses such as funeral expenses or the payment of a loan.
The Benefits of Life Insurance Investments
Investments in life insurance make it possible to build up savings over the long term. Since it is a tax-exempt savings product, the insured will not pay for the interest generated. Two types of life insurance investments must be distinguished: single support in euros and multi-support.
Leverage single-media placements
Also known as “fund contracts in euros”, this type of contract is the least risky. It is generally intended for novice investors as well as for the more cautious. Why ? Simply because the insurer manages the contract and invests the payments made by the insured in financial products. In this sense, the capital invested is always guaranteed. The insured will receive annual interest which is added to the capital over the course of the term of the contract.
The interest rate for this type of mono support contract is also called TMG (guaranteed minimum rate). It is capped and fixed each year by insurance companies. Investing in mono-media life insurance investments can be more advantageous than other types of savings, such as passbooks for example, since the annual rate of return exceeds 2%.
The benefits of the multi-support contract
This type of investment is also known as the unit-linked contract. It is multi-support since it combines two kinds of investment in life insurance: euro fund and unit of account. This type of contract is designed for experienced policyholders and those who like to take risks in order to gain more. However, each step must be calculated in advance and the insured must have a strategy for this type of investment, in order to minimize the risks.
It is clear that this type of contract is more advantageous with a higher profit. However, the insurer cannot guarantee that the part of the capital invested in Euro funds. The other part will be invested in units of account (for example SICAVs, mutual funds, real estate funds, stocks, etc.), which increases the risk, since everything depends on stock market prices. Thus, multi-support placement is the most recommended.
For people who wish to earn more with life insurance investments, it is possible to choose between 3 scenarios:
- Start carefully: invest the majority of the capital in a euro fund and the rest in a unit-linked investment.
- If you like to take a little risk, it is possible to invest 50% of the capital in unit of account.
- The third option is for the more experienced, since the majority of the capital will be placed in a unit-linked investment.
Choosing the right type of investment in life insurance generally depends on the profile of the insured and his objectives, as well as the capital saved. That’s why it’s important to do your research before making a decision.