The advantages and characteristics of life insurance
In recent years, savers have noticed that it is increasingly difficult to find profitable investments in which to invest their money. And yet, by combining the advantageous taxation of life insurance and its versatility in terms of asset management and allocation, it is still possible to obtain a good performance with its investments. In this article, we take a look at the benefits and features of life insurance in detail, as well as the important things to know before comparing different life insurance policies. Readers will thus be able to know how to choose the best life insurance policy based on their financial goals.
Attractive tax advantages.
Life insurance is a tax niche reserved for people residing in France. Contrary to what the name might suggest, life insurance is not simply insurance against the death of its policyholder. The name is misleading. Life insurance is also and above all an envelope in which it is possible to invest your money, while benefiting from tax relief on taxable capital gains. In practice, once the contract reaches 8 years, the subscriber has the option of withdrawing money without paying capital gains tax. In fact, an allowance of 4,600 euros is applied to taxable capital gains. And this allowance is doubled for a couple.
Note that it is quite possible to withdraw your money before the 8 years of the contract: the money is not blocked. However, an early withdrawal will not give entitlement to tax relief. A second tax advantage concerns the transmission of assets. Amounts paid into a life insurance contract before the subscriber turns 70 are exempt from inheritance tax (up to 152,500 euros per beneficiary). After 70 years, there is an allowance but the amount is much lower (30,500 euros).
Versatile, life insurance can meet the expectations of multiple investors.
Life insurance is an envelope within which the underwriter can house a wide variety of investment products and asset classes. In practice, French savers overwhelmingly favor risk-free investments. As a result, 80% of outstandings are allocated to funds in euros. Managed by large insurers (Aviva, Crédit Agricole Spirica, Crédit Mutuel Suravenir, Generali, etc.), euro funds offer a guarantee on the capital invested.
For savers wishing to boost the performance of their investments, it is possible to move towards units of account. Units of account make it possible to invest in a multitude of asset classes. Savers investing for the long term will find it beneficial to favor equities and real estate, the two asset classes offering the best long-term performance. It will thus be possible to accommodate shares of investment funds invested in shares or shares of real estate investment companies within life insurance (SCPI). The return on SCPIs is in the order of 4 to 5% per year, while stocks can offer even better performance at the cost of higher volatility.
Savers who do not have any investment knowledge will have an interest in turning to a wealth management advisor or a managed savings management service to delegate the management of their portfolio and thus optimize the asset allocation taking into account their financial plans, their investment horizon and their risk aversion.
To choose the right contract, do not hesitate to consult the reviews.
There are a large number of players marketing life insurance contracts (banks and specialized brokers). Several hundred contracts are marketed. In these conditions, it is not easy to choose your contract. The choice of contract will depend on the saver's objectives, especially in terms of diversification. Investors wishing to favor funds in euros or investment funds will not necessarily look to the same contracts.
There are, however, a few essential criteria to identify the best life insurance policies. The first criterion concerns management fees. Ideally, the installment fee should be free (this is the case with the best online brokers), and the unit-linked management fee should be around 0.50% per annum. Higher fees will penalize the performance of your investments. Especially since the management fees apply each year.
The best life insurance policies provide access to a large number of units of account. Several hundred for the best contracts. This allows much greater freedom in the allocation of assets. If the saver wishes to subscribe to SCPI (real estate) shares, he will have to consider whether the contract allows access to a large panel of SCPIs. The best life insurance policies provide access to more than twenty different SCPIs.