Life insurance is an essential product, but that is often misunderstood by the French. Maybe you already have some strong ideas about life insurance, but in this article, we’ll walk you through everything you need to know about how it works. So you will know if you have the right information or not. This is the time for people who are wondering whether to put their money in it, to have all the information to decide whether or not to get started. This article aims to introduce you to what life insurance really is from all possible angles.
How life insurance works
Presentation of life insurance
The objective of insurance is to protect against any risk. Auto insurance, for example, is used to cover costs relating to road accidents. Death insurance is used to return a sum of money to the desired person after his death. Know that life insurance works differently. Life insurance is a savings contract in which the payments and the interest produced constitute capital. If he is still alive, the insured will receive this saved capital. If the insured dies, this capital will be transferred to a person previously defined as a beneficiary.
You can establish insurance contracts through insurance companies or insurance subsidiaries of banks. Savings associations (Gaipare or AFER, for example) or approved distributors (wealth management advisers or brokers) can also market life insurance.
Life insurance is an excellent way to remunerate your savings by paying no tax on the interest generated. It is, therefore, an excellent savings product with the PEA for people who want to enjoy tax-free financial income. What differentiates it from the PEA (savings and action plan) is that it is not limited to shares. It is, therefore, more extensive, and we can find several proposals in the same life insurance contract. We can, for example, find in addition to equities, guaranteed euro funds, and real estate.
If you have the capacity to save, your advisor is therefore doing well to encourage you to opt for life insurance. There is a multitude of life insurance policies. You can therefore bet on the one that suits you. So start by doing a little market research before embarking on any choice of life insurance. By choosing good life insurance, you will be guaranteed to accumulate several thousand euros.
Life insurance contracts
We can find life insurance in two forms.
The form of a single-support contract in euros
The single-carrier contract in euros mainly concerns products for which the rates are guaranteed. This contract is primarily intended for people who do not wish to take any risk with their savings. These are risk-free investments where the insurer guarantees the amounts paid. Mono support contracts in euros represent traditional life insurance. They are offered less and less compared to the more popular multi-support contracts. In this contract, all the interest generated is added each year to the payments previously made. This is called the ratchet effect.
The form of a multi-support contract
Life insurance is said to be multi-media when it can contain different media. Generally, in multi-support contracts, there is at least one fund in euros representing the single-support contract mentioned above. At the level of the other funds that you can find, there are some which are based on stock market SICAVs (investment companies with variable capital) while others are based on FCP (mutual funds). They are called a unit of account, and they have no guarantee in terms of amounts. The client receives a certain number of shares with each payment. These units depend on the price of the fund. Note that the value of these shares may vary. It can be seen going up as well as going down.
Depending on the contract chosen, the client can have complete freedom to choose between the different funds. It is free management. The distribution can also be preselected or automated according to a management mandate. This is called management under mandate or managed management.
In addition to funds in euros and funds in UA (unit of account), we can also find diversification funds. This is another type of fund developed in 2014 at the level of the insurance code.
Multi-support contracts are certainly riskier, but they allow you to have a better expectation of long-term gains.
You, therefore, have the choice of going into free management or managed management. Also, it is possible to sell units of account to move towards euro funds (to better secure income) and vice versa. It is even possible to switch from one unit of account to another. So you can see that life insurance is rather flexible. You can certainly see with this diagram how easy it is to put your money there and handle it.
6 unfounded ideas about life insurance
Life insurance is named the most popular savings product among the French. However, we see that many people do not really know him and have unfounded ideas about him. It is, therefore, appropriate for us to clarify your ideas to help you see things as they are.
Your money invested in life insurance is not blocked.
Know that the money you invest in life insurance is not blocked. Better still, it remains available. You can therefore make redemptions (withdrawals) of money, partial or total, when you wish, which goes against the rumors that you had to wait 8 eight years before you could do it. Also, nothing prevents you from paying a sum of money again. You can do anything as long as you stay within the rules of your contract regarding the minimum possible withdrawal and the minimum amount to be left in the account. In general, the minimum amount to leave in the account is around a few hundred euros.
To have the money deposited on his contract, you will only have to contact your insurer, your distributor directly, or do it on the internet if your contract allows it. Another way is to apply for a loan from your insurer. This is an advance. Here you will have the right to receive the requested money without breaking the contract. The contract continues to be remunerated in its entirety. The cost of this advance can vary between 0.5% and 3%, depending on the insurer you choose, and you will have to repay the advance within a reasonable time.
Life insurance is different from death insurance.
As we said above, life insurance is completely different from death insurance. Indeed, death insurance is a preventive product, while growth insurance is, before any other function, a savings product. Death insurance, therefore, offers many advantages when transmitting income to designated beneficiaries in the event of death. For example, you will not have to pay inheritance fees to transmit 152,500 € to a beneficiary. For a person who has 3 children (nephews or others, there is no tax to pay for a sum of € 456,000. Life insurance is deemed to be “ excluding inheritance.” It also allows you to transmit “ excluding rights. common ”to a child in another bed or a friend, etc. Note that the beneficiary clause defined by a client is purely confidential.