Life insurance is not an investment like any other. Beneath its appearance of simplicity, it conceals many peculiarities that require you to think twice before committing.
1. The choice of insurer
The contract is not transferable, although it can last for decades (for retirement or succession, in particular). You will therefore be married to an insurer for a long time (even if your money remains available).
It is therefore safer to find out in advance about its solidity and reputation. It is in fact he who assumes the guarantees of the contract and manages it throughout its duration.
The choice of distributor is secondary: if it disappears, it is the insurer who will continue to make the contract exist.
2. The level of fees
Most savers focus on the fees charged when making payments. They are not wrong, because many products charge them a high price, automatically deducting 4 to 5% of the sums paid.
Given the current performance of euro funds, this means that savings will pay nothing for a year and a half to two years. Hard to digest! However, these fees, which are largely the responsibility of the distributor, are often negotiable, especially if the amounts paid are significant.
In reality, it is the management fees, which are deducted each year from the entire capital (including interest or unrealized capital gains) that are the most important.
In appearance, they are quite low: from 0.5 to 1% per year. But over time, they can be very heavy. Between a contract which takes 0.5% and another which punctures 1%, the difference will amount to 5% of the capital after ten years (and even a little more by the game of capitalization), 10% at the end twenty years old, etc.
3. The quality of the fund in euros
It is the risk-free compartment of life insurance, the one chosen over 80% by subscribers. The average yield was 2.8% last year, but with very large spreads, as rates range from 1.8 to over 4%.
Obviously, it is better to choose a contract whose fund in euros is performing well in the long term, with good regularity, which testifies to management qualities on the part of the insurer and, in general, of good solvency, which him allows a very diversified financial management.
4. Diversification options
Insofar as the return on funds denominated in euros is falling and this movement is not over, many subscribers looking for higher performance are diversifying their savings into “unit-linked” vehicles, which are in direct contact with the financial markets, but without collateral (real estate, stocks, bonds, etc.).
The choice of these units of account can sometimes be very limited (some contracts only offer one), or on the contrary very wide, with several hundred funds.
To achieve real diversification, it is necessary to be able to rely on at least a dozen media representing the main world markets. And it is not useless to look at who manages these funds: in the contracts of the large networks, it is often only the management company of the insurer which is represented, which is not a very good sign, because no manager is not performing in all markets.
Better to favor a contract open to “multi-management”, which selects its supports from different houses, in order to retain the best performing.
5. Management aids
It is not easy to manage the financial management of a diversified life insurance policy… Savers who do not have the knowledge or the time to take care of it must therefore ensure that they can benefit from automatic management services for this savings.
These can be portfolios that are offered by the insurer with turnkey distribution and subsequent monitoring, or – better yet – delegated management.
In this case, the management is entrusted to a management company, and it is a professional who is responsible for the distribution between the supports of the contract, then arbitration to modify this distribution when it considers it necessary.
Not all life insurance companies on the market offer such services. It is therefore best to opt for a contract that offers them, even if you do not intend to use them immediately.