Foresight, we don’t always think about it, but it’s the way to secure your income and your assets to maintain your lifestyle in the event of a life accident.
A pension plan has 3 parts
- the death
- permanent disability
- temporary incapacity for work following an illness or accident
The death component is the least differentiating among the insurers' offers, whereas there are great disparities between the pension contracts on the permanent disability and temporary incapacity for work components due to illness or accident.
Who is affected by a pension plan
For employees, your company must subscribe a life insurance contract for you. But rare are the employees to know the characteristics. Depending on the contract and depending on your personal situation, you could supplement this cover with a private pension plan. For individual entrepreneurs and the liberal professions, it is up to you to choose your pension plan. You can then benefit from an attractive tax deduction as part of the Madelin provident scheme.
If you buy a property on credit, the bank offering the financing will require that you subscribe to a loan provident contract with its establishment or via a third party since the Lagarde law of 2010.
How to choose a pension plan
To date, there is no perfect pension plan, you have to know how to choose between the different contracts on the market depending on your needs and the importance of the contract criteria over time.
Choosing your pension plan means not focusing solely on the price when the subscriber can benefit from a tax deduction. It is also knowing how to arbitrate between events with frequent occurrence and with weak property consequences such as the loss of several days of salary due to a deductible of 8 days instead of 3 days in the event of illness and events with low occurrence but with strong property consequences such as an annuity compensation rate in the event of permanent partial disability of 50% instead of 76% which can cause very significant differences depending on the income and age of the insured.
10 tips for choosing the right pension plan
1) Sign a pension plan with an assessment of the disability rate exclusively according to the professional scale and not according to a functional and professional cross-scale.
Take the example of a surgeon who loses the use of a finger. His functional incapacity which does not depend on his profession will be for example 20% but his professional incapacity which depends on his profession will be 100%. So depending on the pension plan, his disability rate will be either 100% or a cross rate between 20% of the functional scale and 100% of the professional scale.
Also check that there is not in the pension plan a pre-defined list of pathologies which would exclude the pathologies not present in the list and that there is no reduction of the pension if you take up another activity ( a surgeon who would give courses in college for example).
2) Understand how the annuity compensation rate is calculated in the event of partial disability. Depending on the pension plan, the calculation formulas can be t / 66, t / 100 or (t-33) / 33 with t as the disability rate.
Take the example of a 50% disability rate, a contract that applies the t / 100 formula gives a pension of 50% of the amount subscribed (50/100 = 50%) while a contract that applies the formula t / 66 gives an annuity of 75.76% of the amount subscribed (50/66 = 75.76%).
3) Have the lowest possible intervention threshold for the partial disability contract. Depending on the contract, the insurer's intervention threshold can be 0, 16%, 33% or 66%.
4) Check that the insured is the client of the medical expertise. The insurance company should not be able to tax its expert.
5) Take a contract which can be terminated at any time by the insured without having to comply with a notice on a fixed expiry date such as January 1 of each year for example.
6) Identify your tax availability according to the ceiling for tax deduction of pension and Madelin mutual insurance contributions via the formula 3.75% of professional income increased by 7% of the PASS, all limited to 3% of 8 PASS. Note that this pension deduction tax ceiling is independent of the retirement tax available.
7) Opt for a lump sum compensation and not for a compensation in daily allowances and invalidity if your incomes vary from one year to another.
8) Favor the provident contracts which cover up to 67 years instead of 65 years and which offer the possibility of being extended up to 70 years in the event of continuation of activity.
9) Ensure that the contract will cover in the event of death until an advanced age (today, the maximum on the market is 80 years) and that the contract will not be terminated upon retirement.
10) Look at the exclusions from provident contracts with regard to your profession in particular. Certain contracts will exclude back problems or mental disorders. However, mental disorders represent, for example, 40% of the pathologies of doctors who are permanently disabled. (source: Carmf)
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