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Life insurance stands out as a versatile savings product, designed to meet long-term goals, ranging from family protection to wealth building. At its core, life insurance is based on a contract between a policyholder and an insurer: in exchange for regular premiums or a one-off payment, the insurer agrees to pay a lump sum or annuity to designated beneficiaries, according to the agreed terms.
Life insurance variants are mainly divided into three categories:
Life insurance provides a benefit to the policyholder if he or she is still alive at the end of the contract, thus providing long-term savings or preparation for retirement.
Death insurance aims to protect the policyholder’s loved ones by paying them a lump sum or an annuity in the event of the policyholder’s death before the end of the contract.
Mixed contracts combine the advantages of the first two, offering both death cover and a lump sum or annuity if the subscriber is still alive at maturity.
Purchasing life insurance begins with defining the subscriber’s financial needs and goals, followed by selecting the appropriate type of contract. This process typically involves consulting with professionals to navigate available options and specific clauses. It is crucial to fully understand the terms of the contract, including payout conditions, premium investment options, and beneficiary designation procedures.
There are two types of life insurance contracts:
single-support contracts or euro funds: this type of support ensures a certain stability but limits the rate Beyond its primary function of protection, life insurance offers a wide range of financial and asset benefits making it attractive to investors seeking diversification and long-term returns.
Long-term performance potential
One of the major attractions of life insurance is its long-term growth potential. Compared to traditional investments such as savings accounts or bonds, life insurance can offer higher returns by investing premiums in financial markets. Unit-linked contracts, for example, provide exposure to a wide range of assets (stocks, bonds, real estate, etc.), thus offering the prospect of increased gains.
Fiscal advantages
Life insurance often benefits from a favorable tax regime. Capital gains may be partially or completely tax-exempt, depending on the duration of the contract and local legislation. In addition, benefits paid to the beneficiary in the event of the policyholder’s death may also benefit from reduced taxation, thus facilitating the transfer of assets.
After 8 years of holding the funds, the flat-rate deduction falls to 7.5% for premiums paid below €150,000, to which are added social security contributions of 17.2%. In the event of withdrawal before the 8th year, policyholders are subject to a single flat-rate deduction (PFU) made up of 12.8% IR and 17.2% social security contributions.
Flexibility and customization options
Life insurance contracts are distinguished by their adaptability. The subscriber has the freedom to choose his beneficiaries without constraint, and can modify this designation over time. It is also possible to adjust the amount of the premiums, the distribution of the investment between the different media, or even to opt for additional guarantees (floor guarantee, pension option, etc.).
Heritage protection and transmission
Life insurance plays a major role in estate planning. The capital paid to beneficiaries is not part of the subscriber’s estate, thus allowing for a transfer free of inheritance tax within certain limits. In addition, the legal framework of many countries protects the capital invested in life insurance against creditors’ claims, thus providing an patrimonial shield. The taxation of the funds received by the heir varies depending on:
the age of the insured at the time of payments: the capital is not taxed up to €152,000 for premiums paid before the insured reaches the age of 70
After the age of 70, payments are taxed but can benefit from a 30.5% reduction on the amounts received from all beneficiaries.