A life insurance contract is a savings contract that benefits from significant tax advantages:
- tax exemption on interest,
- broad exemption from inheritance tax.
This placement serves several purposes at the same time.
Make your savings grow over the long term for :
- build up capital for a project,
- finance children's studies,
- help them buy their first apartment,
- supplement their own retirement income, etc.
Pass on part of your heritage at :
- their children,
- a distant relative,
- an unrelated person.
Distinguish between life insurance in euros and multi-support
There are two families of life insurance contracts:
- Contracts exclusively composed of a guaranteed euro funds by the insurer. Their yield is not very important but “100% secure”.
- Multi-support contracts. They combine a guaranteed euro fund, a whole range of investment funds called units of account (French, European or international equity funds, European or global bonds, diversified funds, etc.). These units of account range from the most secure to the riskiest (with risk of capital loss).
Multi-vehicle life insurance contracts cover all kinds of investments: stocks, bonds and up to real estate with real estate investment companies (SCPI).
It is possible to split your payments between funds in euros and units of account and to transfer your savings from one compartment to another.
Choose an easy-to-manage life insurance policy
Before taking out a life insurance contract, check if the contract is flexible enough to meet your expectations:
- opening conditions (modest initial payment for example),
- operating rules during life (possibility of switching from one unit of account to another), then on exit (no penalties).
Privilege a formula which provides for scheduled payments and easily authorizes the suspension of this mechanism.
Take a look at contracts offering a managed management: voWe delegate to the insurer the choice of units of account taken out according to your objectives and therefore the degree of risk considered.
If you manage yourself the distribution of your payments and the transfer of your savings between units of account, take into account the costs of arbitration to switch from one medium to another and their mode of operation: online arbitrations, deadlines.
Recover the money placed on a life insurance contract
There are four ways to recover the savings placed in a life insurance contract.
- A withdrawal of all or part of the capital. Your withdrawal includes both part of the savings you have invested and the corresponding interest. These are taxed or subject to a discharge. The latter depends on the length of the contract: 35% if the contract is less than 4 years old, 15% if it is between 4 and 8 years old, 7.5% beyond (after a reduction of € 4,600; 9 200 € for a couple).
- An advance. It allows you to recover part of your savings, without tax consequences, then to repay it later. Ideal in case of a one-off need for money. Its maximum amount, expressed as a percentage of the savings placed on the contract, and the rate at which the insurance company “lends” you the amount you want, vary from contract to contract. Check before using this option.
- Scheduled partial redemptions. Their terms and the cost of the service vary from contract to contract.
- The conversion of all or part of the capital into a life annuity. Again, ask at what price the insurer offers this service.
Some contracts offer “provident” options. Their objective: to prevent, on the death of the insured, that the beneficiary of a contract does not recover a sum lower than the payments of the insured because of stock market losses on the units of account.
Check the level of costs of the life insurance contract
The amount of the fees should not be your main criterion of choice, but it is prudent to check the level.
- Payment fees. They apply every time you fund your contract. They are most often found between 2% and 5%. Generally decreasing according to the amount paid, they directly affect the performance of your life insurance the first year, or even the first two years. On the Internet, some contracts do not require entry fees.
- Management fees. They vary between 0.5% to 1% of invested capital.
- Arbitration fees for multi-support contracts. They are withdrawn each time you transfer your savings from one medium to another. Depending on the formulas, they are fixed or included between 0.25% and 1% the amount of the transaction. Many contracts provide for one or more free arbitrations per year.
Take an interest in the performance of your life insurance
So many criteria go into choosing life insurance that there is no need to focus on the past performance of contracts. Except for the fund's return in euros the product that interests you, because it depends directly on the management implemented by the insurance company.
No need to dwell on the performance of units of account: they are not managed by the insurer, but by management companies. You will study them when distributing your savings between several vehicles.