What is life insurance?
Life insurance is currently the number one savings method in France with three different types of contracts:
- Life insurance: at the end of the contract, the insured receives the accumulated capital or the annuity if the latter is still alive. This optimized long-term savings represents an attractive investment and an advantageous tax system.
- Insurance in the event of death: the capital constituted is for the benefit of a third party, in other words on the death of the subscriber, the savings are paid to the beneficiary designated by the contract. This provident guarantee makes it possible to prepare and facilitate successions.
- Mixed insurance: at the end of the contract, the accumulated capital is paid to the subscriber if the latter is alive, or to the designated beneficiary if he is deceased.
Once the type of contract has been chosen, you have to define whether you want to invest your contract on a single medium or several:
- Monosupport life insurance: your contract is invested in a single medium of your choice which can be either a fund in euros with low-risk investments, or a fund invested in units of account in stocks, bonds, or shares in a variable capital company .
- Multi-vehicle life insurance: your contract is invested in several vehicles. Usually, part of your savings is placed in a euro fund to secure it, and another part in a unit-linked fund to boost it. Depending on the desired strategy, you can then opt for prudent, dynamic or balanced management depending on the distribution of your investment.
Whichever life insurance policy you choose, you benefit from an advantageous savings plan where you can designate the beneficiary of your choice, or embody it yourself.
Why take out a life insurance policy?
A life insurance policy of any kind is not mandatory. However, this type of contract offers you various advantages depending on your situation and the usefulness you wish to have:
- A long-term investment support that allows you to capitalize through regular payments, and to boost your savings in a tax framework that is favorable to you. Please note, however, that the nature of your investments may involve fluctuations due to financial markets, so this should be taken into account when valuing your savings.
- A retirement supplement if you opt for the payment of a life annuity when recovering your capital. This solution guarantees you regular and additional income until the end of your life. You can also plan scheduled redemptions with your insurer, and thus recover part of your capital according to deadlines set upstream. Again, you enjoy regular income, but this time until your savings are exhausted.
- An advantageous succession to preserve your loved ones. Indeed, life insurance and inheritance are often privileged since this savings contract allows you to transmit the corresponding capital to the beneficiary of your choice, and this, within a most attractive tax framework. You can then protect your loved ones financially, or bequeath this savings to a third party, who would not normally appear among your natural heirs. This succession therefore adapts perfectly to all situations:
- Succession for the benefit of a married spouse: the capital is paid to your spouse or your wife, in addition to their share in the succession, and with a lower tax imposed.
- Succession for the benefit of a PACS spouse or cohabiting partner: PACS or cohabiting partners are not recognized as heirs to one another, and therefore cannot claim any inheritance rights. In addition to the mention of your spouse in your will, your life insurance can also be taken out for the benefit of the latter in order to ensure the payment of your capital upon your death under certain conditions.
- Succession for the benefit of grandchildren: The law only provides for inheritance to children if they are still alive. If you wish to bequeath a capital to your grandchildren, you can of course mention them in your will, however, the amount paid will be subject to applicable inheritance tax. However, as the beneficiary of your life insurance, they may receive capital tax-free under certain conditions.
- Capital available when the child comes of age. You can take out a life insurance contract in the name of a minor child and indicate in the clauses of the latter that the corresponding savings can be released upon reaching majority. This will allow your child, grandchild or any other minor third party to get off to a good start in life with ease.
A life insurance contract therefore allows you to adjust your investments to grow your savings according to your wishes, but also to benefit from a capital that adapts to your annuity or succession objectives. A product with multiple possibilities for savings that meet your expectations, whatever the chosen formula.
What are the costs of life insurance?
Like all insurance contracts, fees apply at different times in your life insurance. With different formulas, and various insurer offers, it is important to find out about these fees before you purchase in order to find the best solution for you. These costs can therefore occur at each stage of the life of your contract and break down as follows:
- Entry fees: inherent in the creation of your life insurance contract, these fees may vary slightly from one insurer to another, so the different market offers are recommended.
- Fees taken from your payments: these fees are charged to each of your life insurance payments on your savings. Here again, it is worth checking the clauses of competing contracts as this type of charge is not applied by all insurance companies.
- Management fees: these fees are calculated annually on the total amount of capital constituted, and allow the insurer to earn money.
- Arbitration fees: these fees are incurred when you transfer an amount from one fund to another on multi-device contracts.
- Miscellaneous costs: indicated in the general conditions of your contract, other types of costs may be mentioned. This is the case, in particular, with certain life insurance policies invested in unit-linked accounts with real estate, for example.
Life insurance costs may therefore apply at different key points in your contract. In order to avoid any unpleasant surprises and have a clear vision of how to optimize your savings each year, it is important to carefully compare the different contracts offered, and to read the general conditions in detail.
What taxation for your life insurance contract?
Whether it is your payments to build up your capital, a buyback to recover part or all of it, or an inheritance, it is essential to know the taxation that applies to your contract. life insurance to anticipate the sum received as accurately as possible.
- Payments into your savings: during the savings phase, the capital gains made on your investment funds during arbitrations do not give rise to any taxation or social security contributions. On an annual basis, social security contributions set at 17.2% will be deducted from the interest received from your contract. However, you build up your capital in the most advantageous taxation.
- Partial or total redemption of your capital: taxation only applies to the capital gains generated and not the original capital. To be sure, you can ask your insurer to confirm the share subject to tax. In addition, the length of your contract plays a role in the taxation applicable to the payment of your savings. Indeed, a contract of more than 8 years allows you to benefit from a life insurance allowance of € 4,600 per year on your interest, and goes up to € 9,200 for a couple.
- Succession: the capital paid to a beneficiary under a life insurance contract is not subject to inheritance tax. The tax that then applies allows you to benefit from a reduction of 152,500 euros per beneficiary. The amount collected will then be subject to a 20% tax from 152,501 to 852,500 euros, then 31.25% beyond that. Life insurance therefore remains an ideal solution for bequeathing capital with an advantageous tax regime.
Life and estate insurance
As detailed above, life insurance is an advantageous contract in the context of an estate. As the capital paid to the beneficiary is not subject to inheritance tax, it is not necessary to indicate his life insurance to the notary. However if the bequeathed premiums are exaggerated and involve a requalification of the life insurance contract, the savings paid to the life insurance beneficiary are again subject to inheritance tax, and must therefore be notified to the notary.
Which management to choose for your life insurance?
As part of your life insurance, you can choose between two different types of management for your contract. These management methods are offered by insurance companies and adapt to your situation:
- Managed management: your investments are entrusted to a specialized external management company according to your risk profile and your investment objectives. You stay calm and follow the evolution of your savings without having to worry about how it is managed over time.
- Free management: as its name suggests, this type of management allows you complete autonomy in choosing your investment vehicles. Thus, you modify as you wish your savings on the various investment funds, in accordance with the risks you accept to take, and your objective of capital to be constituted.
Whatever solution you choose when you take out your life insurance contract, you can change the type of management of the latter at any time thereafter. All you have to do is modify the corresponding management mandate, which can take effect in just a few working days.
Choose life insurance
Before comparing the different offers on the market in terms of life insurance contract, it is essential to define your investment plan. Between long-term savings, retirement supplement, or inheritance with advantageous taxation, the reason for your investment allows you to direct your research on suitable formulas only. You can then take the time to compare the life insurance policies and rates of each insurer to find the offer that best suits your expectations in terms of risk, growth, and management.
You can also consult our opinion on the different life insurance to guide you in your selection.
Unlike other types of contracts, the termination of a life insurance policy does not occur through a traditional termination. Indeed, it is necessary to carry out a repurchase action of your contract. This operation allows the subscriber to recover some or all of the invested capital. There are therefore two types of surrender: partial surrender where the contract continues with a reduced capital, and total surrender where the contract ends.
Partial buyout of life insurance
The partial redemption of your capital allows you to recover part of your savings according to a minimum amount set by the insurer. Accessible at any time, this operation can meet a specific need in your life. However, it is important to note that if the contract has already been accepted by the designated beneficiary, you will not be able to perform this type of surrender transaction.
To request a partial surrender of your life insurance, all you need to do is send a registered letter to your insurer, enclosing a copy of your identity card, a bank identity statement and the last annual information statement. of your contract. The corresponding funds will be paid to you within 30 days of your request. In the case of a single-support life insurance contract, the partial redemption will be made only on the fund in euros, on the other hand, in the case of a multi-support contract, the payment will be made in proportion to the value of the units of each support invested.
Total purchase of life insurance
The total surrender of a life insurance contract allows the subscriber to recover all of the funds invested. This is therefore the only type of buyback to close the said contract. Accessible at any time, and without any seniority conditions on your contract, this option however involves the application of tax on the interest received, as well as the amount of social security contributions set at 17.2%.
Here again, your request must be made by registered letter addressed to the insurer, specifying the terms and references of your contract, as well as your desire to close it with a full surrender. Upon receipt of this document, the insurer has two months to take your request into account and pay the full capital.