Life insurance: what is it? Although life insurance remains the preferred investment of the French, and most have subscribed to it, it is sometimes difficult for ordinary mortals to understand exactly what it is. You will find below all the explanations to understand this placement “original”, and that offers so many advantages that it quickly became the placement most subscribed by the French.
Explaining life insurance: what’s the point?
Subscribing to a life insurance policy allows the subscriber to earn a return on his or her capital through long-term interest, in the same way as a savings product. So it’s an investment.
However, this investment also benefits from other tax advantages and transmission solutions, which do not exist on other investments.
The life insurance contract is suitable for all investment contexts. It allows you to choose:
- To build up your retirement capital
- Saving for a project such as a real estate purchase, or funding your children’s education,
- To prepare the transmission of capital,To make you a heritage, by placing your savings, an inheritance, etc …
There are hundreds of different contracts in the market, it’s up to you to make the right choice, depending on your project.
The differences will concern interest rates, different options for redemption, investment, flexibility of the contract, etc.
Explanation life insurance: subscription
The subscriber must establish, at the time of subscription, a final term for his contract. He will receive the sum saved, in case of life, by this deadline. It is up to you to determine the term of your contract, knowing that a life insurance becomes truly advantageous, from a tax point of view, from the 8th year. All the advisors you meet will therefore talk to you about a minimum investment period of 8 years.
Also, do not feel limited: this end date can then be shifted. The end date of your contract is, according to the contracts, renewable every year, this is known as prorogation.
For most contracts, the amount of payments is free, but there are still some contracts where it is capped at minimum. The most standard contracts are open to all.
On the other hand, so-called luxury contracts require a lot of money to access them. The benefits will be essentially tons of additional options, and placement fees that may reach higher rates with perhaps more security.
Finally, and this is one of the very peculiarities of life insurance, in the event of the death of the subscriber, the money saved will be paid to the beneficiary (s) you have previously designated Of the subscription.
On a classic investment, you can not identify exactly who you want your money to be paid to if you die: it will fall directly into your inheritance, and will be redistributed among all your legal beneficiaries, whether you like them or not.
Explaining life insurance: different contracts
Technically, there are two different types of life insurance:
–The monosupport contract (or euro fund contract). This is a risk-free investment. Your money will be placed by the insurer on a secure “support”. In other words: your money will not be used to buy shares, or be played on the stock market.
–The counterpart of this security is that you will benefit from lower rates of pay … but certain, without any risk of loss. Even though the rate of return on euro funds has been steadily declining in recent years, this does not affect the popularity of this investment.
–The multi-carrier contract. This type of life insurance combines a euro fund (secured as described above) and a fund called “units of account”. Behind this somewhat barbarous name is in fact a term better known to everyone: the purse.
–In other words, a multi-fund contract allows the subscriber to invest part of its life insurance capital in a secured investment and another part in shares or similar financial products. You combine security and risk-taking: you also open up the possibility to make more interest, but also to make less interest than a 100% secured investment, assuming the stock market tumbles. This is a riskier investment, but also potentially more profitable.
–The insured is, for example, free to change and change his investments in a unit of account, this is what is called arbitration.
Finally, for all types of contract, each year is added to your capital, a sum of “profit-sharing” that varies according to the capitalized amount. In addition, each year the life insurance policy benefits from a minimum revaluation. Thus, the insured is sure to make his capital grow with a minimum of risks. In addition, options can be provided for the interest to be fully acquired: this is called the ratchet effect.
You now know a little more about life insurance. So do not hesitate to go on an insurance comparator to sign up for the most interesting online life insurance policy, or to help you find the deals that seem the most interesting first, Consult with an advisor to be sure that you will invest well in an investment that is right for you.
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