Given the dynamism of the life insurance market, finding the best contract is not easy. However, whether you are looking for the best return or the most flexible contract, it is worth studying the market as there are so many disparities! How to choose the best life insurance for your savings? Which life insurance policies have the best returns in recent years? What are the other elements to take into account to make the right choice in 2020? We tell you everything.
What is the best return for life insurance?
Life insurance works like an envelope: the savings you build up on this contract can be invested in various media. We traditionally distinguish:
- The single-carrier life insurance contract : Your money is 100% invested in a fund guaranteed by the insurer and secure, that is to say that you will not be able to realize a loss. This secure medium is the euro fund.
- The multi-support life insurance contract : part of your capital is positioned in the euro fund and a more or less significant fraction is placed in riskier but potentially more profitable vehicles: units of account.
The distinction is very important. Where the euro fund will earn relatively predictable interest each year, the units of account (FCP, SCPI, UCITS, etc.), depending on the financial / real estate markets, will generate variable gains / capital gains, due to market fluctuations. It is therefore very difficult to have, a priori, visibility on the profitability of these media.
What are the best euro funds on the market in 2020?
Many entities (press, consulting firms, etc.) come out of the charts / rankings every year the best euro funds in life insurance, that is, those that have outperformed market averages. Other criteria are generally taken into account such as the level of costs, the variety of media available, returns over 3 or 5 years, etc.
The rate of return on a euro fund will depend, among other things, on its composition. Classic funds are roughly 80% made up of government or corporate bonds, but some have a significant portion, for example, in stocks or corporate real estate. The latter, whether for example dynamic or opportunistic funds, are often more profitable.
Here are 3 life insurance contracts (mainly in euro funds) which often receive top honors:
- Nalo life insurance: return net of management fees of 1.25% in 2019.
- Yomoni life insurance: 2.40% net of management fees in 2019.
- Direct Placement life insurance: 3% net of management fees in 2019.
We see that the reported returns (excluding social security contributions) are much higher than the average market returns.
Some contracts lay down specific conditions in terms of premiums paid. For example, 50% of your payment on the Sérénipierre contract must be invested in units of account (and a maximum of 35% in Euro Stone Security).
Some funds are marketed by several establishments. A bank and an insurer could very well offer the same fund in their contracts.
What are the best units of account?
In this context of low interest rates, and therefore the low yield of most euro funds, many savers review the distribution of their capital and reallocate part of their savings in units of account, for example:
- UCITS (Collective investment undertakings in transferable securities);
- by SCPI (Civil society of real estate investment);
- of OPCI (Collective real estate investment organization).
In 2020, 27% of life insurance outstandings in France were invested in unit-linked. This share has increased every year since 2011. By placing part of your capital on these supports (as part of a multi-support contract, therefore), you can expect greater profitability, depending on the evolution of the financial and real estate markets. . However, the risk of losses exists, because the sums invested in units of account are not guaranteed!
Concretely, by buying, for example, shares in SCPI on your life insurance contract, you are investing in rock-paper. You will therefore hold shares in a fund that is itself positioned on this market (in commercial real estate, for example).
SCPIs (or OPCI / SCI) are often considered a safe bet in terms of profitability (3% / 4%), for a lower dose of risk than for other active ingredients (such as stocks for example).
Among units of account, some assets are less risky than others, like bonds or cautious flexible funds for example. It will all depend on your investor profile and the level of risk you are prepared to take. Ideally, prefer life insurance contracts that offer you a wide variety of funds available, so that you can diversify your savings and thus (to some extent) minimize the risk of loss.
The return on life insurance is not the only criterion to take into account when choosing a contract. The diversity of funds offered or the level of fees are just two of the other important elements. For example, a high-performing contract may see its gross profitability slashed by high annual management fees.
In order to help you open the best life insurance contract for you, given your expectations and the criteria that matter most to you, we have developed an online life insurance comparator. Our comparator is anonymous, free and very easy to use. In addition to this, you need to know more about it.
How to choose the right method and management options in life insurance?
If you are looking for a little profitability on your life insurance contract (beyond that of the secure euro fund), you will necessarily have to invest part of your capital in units of account. If you are new to financial / real estate markets, we recommend that you do not manage your contract yourself. Remember that units of account are risky products, reserved for sophisticated investors.
Fortunately, you can delegate the management of your assets to the insurer, which will then carry out arbitrations (i.e. investments) taking into account your risk profile. There are several management modes, such as:
- free management : you make your arbitrations yourself;
- streamlined management : the insurer takes care of the investments on the basis of your profile (prudent, balanced, dynamic, etc.);
- management on the horizon : The composition of your assets will change with age, and will become less and less risky over time.
You can also opt for management options, That is to say automatic arbitrations such as, for example:
- securing capital gains : the gains made by your UC join the euro fund;
- dynamization : the interests of the euro fund are reinvested in units of account;
- automatic rebalancing : your contract keeps the same distribution throughout its duration (eg: 50% in euro funds, 50% in units of account).
The choice of this or that management mode, as well as the options, is yours. It will depend in particular on your degree of knowledge of the markets, your objectives, the degree of risks that you are prepared to accept with a view to profitability, etc.
Should we turn to new generation euro funds in 2020?
There are now alternatives to classic euro funds, which are made up largely of bonds, and therefore not very profitable. Today, you may be offered the euro-growth fund, alternative funds, opportunists …
These new generation funds were designed to compensate for the perpetual decline returns served by euro funds. Part of the money is then placed in potentially more profitable assets. For example, in an opportunistic fund, the manager will arbitrage at any time, depending on the opportunities.
These funds, which are not offered by all institutions, are a good alternative to the traditional euro fund, and generally show superior performance.
Regarding the euro-growth fund, the capital will only be guaranteed at the end of commitment (over 8 years, 10 years or more). You can buy back life insurance beforehand, but the capital will not be guaranteed. This long / very long-term investment consists of more dynamic products than those found in a classic euro fund, and in particular French stocks (the capital is partly invested in national SMEs).
How do fees affect the return on life insurance?
A remunerative life insurance contract (compared to market averages) inevitably loses its interest if it is encumbered with significant costs. When comparing multiple contracts, always focus on the rate of return net of life insurance fees.
As a general rule, institutions selling life insurance contracts communicate the net returns generated by their euro fund, that is to say net of management fees, but excluding social security contributions.
Each insurer, bank or association of savers on the market is free as to the level of fees charged. These vary widely from contract to contract. Before taking out life insurance, therefore, pay particular attention to this point. There are 3 kinds:
- payment fees (or entry fees for the first payment), which are in principle proportional to the amount of the premium;
- annual management fees, again proportional to the outstanding amount held on the contract;
- arbitration costs, levied in the event of the purchase / sale of assets.
Depending on the management mode chosen (as well as any options), the cost of your contract may increase further.
Life insurance costs:
In general, we see that banks / insurers are particularly greedy in terms of fees. Conversely, online life insurance (online banks for example) are known for their efforts in this area (certain fees may also be offered, especially if you carry out arbitrations on your contract).
Frequently asked questions about life insurance:
Several points must be checked to choose the best life insurance:
– the rate of return from previous years;
– the levels of applied fees ;
– the management options available;
– the quality of online tools.
The easiest way to assess all of these criteria is to use an online life insurance comparator, such as Reassure Me.
The profitability of life insurance in 2020 cannot be anticipated. All the same, here are 3 life contracts in euro funds which often reap the honors in recent years:
– Fortuneo life with a net rate of return of 2.40% in 2019.
– Garance Savings with a 2019 rate of 3%.
– Monceau Insurance with a rate of 2.20% for its Dynavie contract.
It all depends on your intentions and your knowledge of the savings market! If you are familiar with it, opt for free management: you decide on your investments. If, on the other hand, you are not confident, opt for streamlined management: your insurer manages.
As for the profitability of your contract, investments in euro funds will be secure but less profitable, while investments in unit-linked funds can earn you more but are more risky!
It is a flexible savings vehicle on which you can make one-off or regular payments. The capital that you build up, and the interest that flows from it over time, remains available to you at all times thanks to the redemption (partial or total) of the life insurance.