Alongside the so-called “monosupport” life insurance contracts composed only of a fund in euros, which until then captured the bulk of the 1,750 billion euros deposited by French savers on life insurance products , so-called “multi-carrier” life insurance contracts now constitute almost all the contracts offered on the market. Presentation and operation of these contracts, their advantages and disadvantages for the investor.
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Multi-vehicle life insurance: juxtaposition of two types of investment
A multi-support contract combines two types of investment.
A “funds in euros” section
As in the mono-support contract, the multi-support includes a fund in euros managed directly by the insurer or by a management company. The latter ensures security by guaranteeing the capital allocated to this investment component.
The fund in euros guarantees payment at the end of the contract of a capital equivalent to that paid at the time of subscription, less entry fees and possibly annual management fees (depending on the contracts), plus interest generated during the life of the fund. of the contract and which are definitively acquired due to the ratchet effect.
A component in “units of account”
In addition to the euro fund, the multi-support contract offers a range of other investment solutions (or supports) which come in the form of investment funds and other financial supports called “units of account” (UC).
Whatever the movable medium (SICAV, FCP, equities, index funds, bonds) or real estate (real estate funds, OPCI units, SCPI units, etc.) this section does not grant any guarantee of the invested capital. Moreover, these units of account are not expressed in capital, but in number of units whose value fluctuates every day depending on the financial markets.
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How the multi-carrier life insurance contract works
Diversification of savings, various management methods and options offer policyholders great flexibility in making their investment.
Diversification of savings
From the moment of subscription, the saver is involved in the choice of funds according to the risks he accepts. His investor profile will determine his choices. When subscribing, the insured chooses from the more or less long list offered by the insurer the media on which he wishes to position himself. This range includes from a few dozen (at traditional insurers and banks) to several hundred media for contracts offered on the Internet or by wealth management advisers.
The diversity of media allows informed savers to spread the risk between geographic areas (France, Europe, Asia, USA, etc.), but also branches of activity (automotive, oil industry, energy, biotechs, etc.).
Usually, the contract requires it to invest at least 20% of its capital in UC. Once the allocation is made on the chosen CUs, the rest of the invested capital will be allocated to the fund in euros.
A choice among different management modes
Once the allocation has been made, the investor will have the choice between different management methods for his contract:
- Delegated (or mandated) management: the saver does not take care of anything. Management is granted to the insurer or a management company which takes care of everything.
- Streamlined management: management is carried out by the insurer as part of a typical investor profile chosen by the saver.
- Advised management: the insured manages his contract alone, but receives advice allowing him to make the necessary arbitrations to protect his savings.
- Free management: the investor is fully responsible for monitoring his investments.
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Various options are possible
Paying or not depending on the options and the insurers, they allow policyholders to adjust or secure their contracts.
We will first mention the automatic arbitrage, the automatic securing on the euro fund of the capital gains realized on the UC. Let's also talk about the “minimum guarantee” aimed at guaranteeing the losses noted on the contract in the event of the subscriber's death. Each insurer offers its more or less useful options and at a higher or lower cost.
Advantages and disadvantages of the multi-carrier life insurance contract
For the investor, taking out a multi-support contract has advantages, but also drawbacks compared to taking out a single-support contract.
Advantages of multi-support contracts
As opposed to funds in euros which now offer only a minimum return that no longer even compensates for inflation, unit-linked in multi-support contracts offer much better prospects for earnings. The diversity of the units of account offered allows the investor a fairly wide choice of investment possibilities.
For policyholders mastering finance, UCs allow management by the investor himself, combining access to efficient markets and favorable taxation of life insurance.
The multi-support contract allows the insured to modulate the risk according to his situation, with increased risk-taking at the start of the contract to boost savings, more careful management safeguarding capital gains and capital over time. as the term of the contract draws closer.
Good to know : at the end of the contract, the insured (or the beneficiary in the event of the death of the insured) may opt for the delivery of securities or units when these are negotiable. He is not obliged to agree to receive the equivalent in euros.
Disadvantages of multi-media contracts
As a consequence of the possibility of a higher gain and in contrast to the euro fund, funds invested in UC do not include any guarantee of value. Only the number of units is guaranteed by the insurer. And the performance of CUs can vary dramatically from year to year depending on financial crises. Hence a risk of loss to be taken into consideration.
Many contracts provide for the obligation for the insured to keep a minimum percentage of his capital invested in risky media, which prohibits him from folding all of his investment into the fund in euros during financial crises.
Finally, the specific management fees related to CUs (and collected by managers) are added to the contract management fees levied annually by the insurer.