What is the principle of life insurance?
Life insurance is a contract by which the insurer undertakes, in return for the payment of premiums, to pay a annuity or one capital to the insured or his beneficiaries It can be used as a savings product at medium or long term.
At the end of the contract, the insured or his beneficiaries can recover the sums invested, increased by any gains and reduced by costs (in particular for administration and management).
After opening the contract by an initial payment, it is possible to make payments, regular or not, without limit of amount. Even if it is fiscally more interesting to save for at least 8 years, you have the right to close your contract ormake withdrawals anytime.
The main types of contracts
Single support contracts in euros
Your payments are invested in risk-free products, such as government bonds, and revalued each year. The capital invested is guaranteed at all times and the interests of the year are definitely acquired.
Your payments are invested in risk-free products but also stock market related products (bonds, stocks, funds, Sicav, etc.), invested in the financial markets, called units of account (UC). The insurer does not guarantee the value of these units, which varies, but their number. This investment is more risky than funds in euros, but this can be more profitable.
The advantages of life insurance
Life insurance offers many advantages.
She allows to build up capital over the long term. After a few years, you can withdraw your capital, that is, close your contract and withdraw the money deposited, plus net interest. Warning ! You are not guaranteed to recover your entire stake if you invest in account units (UC).
It also offers the possibility of supplement income, especially for retirement, by regular withdrawals or the transformation of your capital into a life annuity.
Finally, life insurance is a great tool for inheritance thanks to an advantageous taxation and a great freedom in the choice of the beneficiaries.
Life insurance: what taxation?
Interest from payments made since September 27, 2017 on your life insurance policy is subject to one-off lump sum (PFU).
The single flat rate levy (PFU) comes into play during partial or total withdrawal amounts available on your life insurance policy.
For a withdrawal from an intervening life insurance contract 8 years after opening, the one-off direct debit amounts to 7.5% for amounts paid less than € 150,000.
In all other cases, the one-off direct debit amounts to 12.8%.
Finally, the single flat-rate direct debit (PFU) is added 17.2% of social levy.
The interest from payments made before September 27, 2017 remain subject to the tax regime preceding the introduction of the single flat-rate levy:
- for a contract of less than 8 years : interest is subject by default to the progressive scale of income tax or, optionally, to the fixed-rate levy (PFL) amounting to 35% before 4 years old and at 15% between 4 and 8 years old.
- for a contract of more than 8 years : interest is subject by default to the progressive income tax scale or, optionally, to the flat-rate direct debit (PFL) amounting to 7.5%.
What taxation for heirs?
When the life insurance subscriber dies, the amounts paid to the beneficiary of the contract are not part of the deceased's estate.
If the beneficiary of your contract is your PACS spouse or partner, he will not be liable forno inheritance tax, even if you have funded your contract after 70 years.
For the other beneficiaries, the tax treatment varies according to the age of the insured person when the premiums are paid:
- for amounts paid before age 70 : after application of the abatement of € 152,500 per beneficiary, capital is taxed at 20% for the taxable share of each beneficiary not exceeding € 700,000, then to 31.25% beyond.
- for amounts paid after age 70 : a single reduction of € 30,500 applies regardless of the number of beneficiaries. Beyond this, the paid-up capital is reintegrated into the estate assets. However, capitalized interest is exempt.
Who to buy it from?
The contract, managed by an insurer, may be subscribed with an agent or broker but also through your bank or savings associations.
The duty of advice
The insurer is required to inform you characteristics of the products he sells to you. Since 2010, as with any other financial product, the intermediary who markets life insurance must inquire about your objectives and sell you a product adapted to your needs.