Life insurance is both an insurance contract and a savings product. It can be purchased from banks, insurers, brokers, or wealth management firms. Discover how it works and its advantages, for both the policyholder and the beneficiaries.
Life insurance: what is it?
Life insurance is the primary savings vehicle in France. Signed between an insured party and an insurer, the contract allows for the payment of an annuity or a lump sum to one or more chosen beneficiaries, in exchange for premium payments.
The main principles of life insurance
By taking out a life insurance policy, the insured agrees to contribute to it more or less regularly with the amounts of their choice. The insurer then manages the invested funds and must pay the insured, or their beneficiaries, an annuity or a lump sum at the end of the contract.
The objectives of such a contract
This is a versatile product that offers unparalleled flexibility in the world of investments and insurance. Life insurance, in particular, allows you to:
- To build up capitalYour money is invested through regular or lump-sum payments, depending on your savings capacity. After a few years, you can withdraw your capital by closing your contract. If you have chosen a single-asset contract, the euro fund will have paid you interest each year. In the case of a multi-asset contract, you can also potentially benefit from capital gains generated by stocks or bonds.
- To build up a supplementary incomeThe funds saved in a life insurance policy can be withdrawn at any time to finance your projects. You can receive them as a lump sum or an annuity to provide supplementary income for your retirement.
- To pass on one's heritageLife insurance also serves to protect the future of your loved ones. By taking out such a policy, you choose one or more beneficiaries who will receive the accumulated savings after your death. The accumulated capital will benefit from advantageous tax treatment as part of an estate transfer.
The benefits
If life insurance is so successful with the French, it is because it offers several advantages that allow the above objectives to be achieved.
A flexible placement
Life insurance provides a vehicle into which you can deposit or withdraw money at any time. While a minimum deposit is generally required, the policyholder enjoys considerable flexibility in managing their savings.
Support for many life projects
Preparing for retirement, financing a wedding or a trip, making a property purchase, helping one of your children with their studies, preparing for your death… Life insurance can help to achieve many projects during working life, once retired or with a view to inheritance.
Capital transferred outside of inheritance
Every life insurance policy includes a beneficiary clause that designates who will receive the funds upon death. When the insured dies, the capital is exempt from standard inheritance rules and benefits from favorable tax treatment, which varies depending on when the premiums were paid into the policy.
How does life insurance work?
Looking to save, grow your capital or plan your estate transfer? Discover how life insurance contracts work, from subscription to the recovery of financial assets.
Conditions for taking out life insurance
The policyholder of a life insurance contract must meet the following conditions:
- have the legal capacity to enter into a contract (thus, he/she must be neither a minor nor an adult under guardianship),
- to respect the age limits imposed by the insurer,
- complete the medical questionnaire provided by the insurer.
- commit to paying the premiums stipulated in the contract.
The insurer has many information obligationsto ensure that the subscriber fully understands their commitments. After signing the contract, the insured has 30 calendar days to withdraw.
Investing within the contract
When taking out life insurance, the insured has a choice: to opt for an investment and a contract single or multi-support.
Single-premium life insurance
It only offers one investment vehicle called a euro fund. This is a safe solution with a guaranteed minimum annual return.
Multi-support life insurance
It only offers one investment vehicle called a euro fund. This is a safe solution with a guaranteed minimum annual return.
The different management methods
Life insurance policies can be managed in different ways. The main ones are:
- self-management,
- managed or automated,
- Management under mandate or delegated.
In the first case, the policyholder manages their investments and savings entirely independently. This option requires time and a good understanding of the markets. In the second, management is flexible but with various predefined arbitrage options that are applied automatically. Finally, the third solution involves entrusting the management of one's capital to a professional. While this saves time, it often entails paying additional fees.
Life insurance remains an advantageous investment in many respects, whether for building savings or preparing for various life events, including inheritance. Euro-denominated funds and unit-linked funds can be partially or fully redeemed at any time by the policyholder. After the insured's death, the beneficiaries of the contract receive the capital. They then benefit from favorable tax treatment.
