SUMMARY
Why take out a life insurance contract?
The different life insurance contracts
Other parameters that differentiate life insurance policies
Undertake a comparative analysis regarding the monetary aspects of life insurance policies.
Life insurance amalgamates features characteristic of savings instruments alongside the protective elements facilitating future planning for oneself and one’s dependents. Nevertheless, it is not devoid of associated risks, which are contingent upon the specific product selection. To ascertain the policy that most effectively aligns with personal requisites, it is imperative to acquire impartial data and juxtapose various contracts based on their financial implications, assured guarantees, and potential profitability. Investigate the particular criteria that ought to be considered in order to identify the optimal offering, informed by one’s distinct circumstances and aspirational goals.
Why take out a lifeinsurance contract?
Life insurance is an investment designed to build up capital over the long or medium term. The invested capital comes from free or regular payments, with a rate of return that varies depending on the contracts and their composition. It is possible to invest your savings in two types of media: euro funds and account units. The former are secure but have a lower return than the latter, which are riskier.
This particular savings instrument, which is proffered by insurance entities, is capable of addressing an array of aims, such as the preparation for retirement or the execution of a real estate initiative over a medium to long-range timeframe. Furthermore, it represents a viable method for the transference of liquid assets, independently of inheritance regulations and subject to specific stipulations, to designated heirs or beneficiaries as per one’s preference.
On the other hand, it is not a suitable short-term savings product. The capital can be withdrawn at any time, but advantageous tax conditions apply after 8 years of holding. Any premature exit from the scheme causes the subscriber to lose their tax advantages.
The different life insurance contracts
Contrary to pop belief, lifespan insurance is a varied investment, which includes too different levels of reportage. It is really possible to severalise three types of guarantees:
(1). The “life” contract: the cap and interest are paid to the subscriber, if he is relieve live at the end of the contract, to his beneficiary or beneficiaries. If the insured dies before the end of the contract, the capital is returned to the beneficiaries.
(2). The “in case of death” contract: the capital is set by for a beneficiary outlined in advance by the endorser. When the insured dies, the capital is paid to this beneficiary. The ratifier can also withdraw the capital from his declaration to finance personal projects.
(3). The “mixed” declaration: provides for the defrayment of so great to the subscriber if he is stock-still too alive at the end of the declaration or to his beneficiary(ies) if he has died. The selection of a type of contract depends above all on your objectives. Thus, the “in case of life” contract is more suitable for building up retreat savings, while the “in case of decease” undertake is of specific stake in an heritage strategy.
Other Parameters that Differentiate Life Insurance Policies
Beyond their typology, it is possible to distinguish contracts according to the capital distribution models that influence the capital guarantee. The subscriber thus has the choice between a life insurance contract in euro funds “single support”, or “multi-support” life insurance which includes euro funds and units of account.
Single-support life insurance: its capital is fully invested in euro funds. This investment provides a high level of security to the subscriber, since the capital, guaranteed by the insurer, is not subject to a risk of loss. In return, its return is lower and is not always sufficient to cover the insured’s objectives. In 2022, the return on euro funds was still on the rise and reached 2% (source: France Assureurs).
Multi-support life insurance: it includes a portion of capital in euro funds and another portion invested in units of account, which groups together various investment vehicles, such as shares, bonds, and monetary products. The potential profitability is higher, but it is accompanied by a higher level of risk of financial loss. But it is above all the chosen investment strategy that modulates this risk. Thus, dynamic management offers less security since the majority of the capital is placed in units of account composed of stock market investments. Prudent management, which consists of keeping the largest portion of euro funds, can reduce the profitability of the system. A possible compromise consists of selecting more secure investments, such as safe havens or real estate investment products while keeping half of the capital in euro funds. The level of security can be adjusted according to the evolution of your needs.
Compare the Costs of Your Life Insurance
Once the guarantees and types of support have been chosen, it is interesting to look at the financial aspects to compare the costs of life insurance contracts. There are significant disparities linked to the competition between offers. To make a realistic comparison, it is necessary to take into account:
Entry fees: these may vary depending on the insurance company. They are charged as a percentage of the first payment. These fees are converted into payment fees after the first payment. Their amount is therefore charged with each new payment.
Arbitration fees: these are the premiums paid to the insurance company in the event of a change in the supports. It is important to properly assess the arbitration fees upstream as part of dynamic management, requiring a reorientation of the initial investment strategy.
Management fees: collected annually by the insurer, they are used to remunerate the contract manager.
Early withdrawal fees: to recover part or all of their annuity, the insured must pay an amount between 3 and 5% of the capital.