Life insurance? Some concepts to understand

What is life insurance?

It is one of the investment products of the French. In 2020, the outstanding amount of life insurance contracts (mathematical provisions + provisions for profit-sharing) amounted to nearly 1,800 billion euros.

It is a savings contract signed between an insured person (you) and an insurer. You entrust him with your money so that he can grow it for a specific period of life. The savings are invested in a guaranteed “euro fund” or in “units of account” whose value evolution is linked to the financial markets. A mixture of the two formulas is possible, and this distribution can be modified by carrying out arbitrations.

Secure or dynamic management

  • Single-unit contracts made up of funds in euros are the main originality of life insurance because these compartments are risk-free. The capital invested can never decrease: the insurer commits to a minimum revaluation rate each year, to which it adds “profit-sharing” at the end of the year. Once credited to the saver’s account, the gains can no longer be called into question and they, in turn, benefit from the annual revaluations. The return on funds in euros for life insurance contracts has fallen steadily for the past ten years and averaged around 1.4% in 2019. 

Life insurance is the preferred investment of the French. In 2021, life insurance outstandings in France exceeded 2,400 billion euros. It is, by definition, THE ideal retirement savings product because it combines flexibility and attractive taxation. Finally, it is the perfect investment for the transmission and accumulation of savings and, of course, for preparing for retirement.

Life insurance? Some concepts to understand

It is a contract concluded with an insurer on which the subscriber pays contributions (also called “premiums”) to build up savings or protect his relatives. 

A distinction is made between savings contracts (to build up savings) and provident contracts (payment of a sum in the event of the person’s death). The saver may recover all or part of his invested funds at any time in the savings contracts. and pension contracts 

At the end of the contract, the savings added to the interest can be paid back:

  • To the subscriber, in the form of capital or annuity
  • To a person named in the contract if the subscriber is deceased.

One of the interests of life insurance is, on the one hand, its flexibility on payments and its exit, but also the tax advantages which are attached to it.

Life insurance 2021 comparison of the best contracts in euros

The life insurance contracts of direct insurers unquestionably offer the best returns on the market with, in addition, fees far below those of traditional banks and insurers. On the other hand, they ask to agree to manage their contract online without a dedicated advisor, but with the support that is very available online or by telephone.

The best 100% euro risk-free contracts offered up to 2.75% in 2020 (Garance Mutuelle), well above the market average at 1.4% in 2020. 

Beyond the performance, the subscriber will have to check the fees applied to his contract, particularly the payment costsIf most online insurers do not charge these fees, traditional insurers puncture on average between 2 or 3% of the amounts paid. Thus, for €100 paid into your contract, with a 3% payment fee, only €97 will be placed on your contract. 

Life insurance favorite investment of the French

Life insurance, the preferred investment of the French, can thus be considered the “Swiss army knife” of assets… it can be used both to invest money, protect loved ones, reduce tax, or prepare for retirement.

Moreover, life insurance contracts are often called “retirement savings contracts” because they allow:

  • Protect yourself in the event of a hard blow with secure savings
  • To accumulate capital by making regular payments
  • To protect his loved ones
  • To transmit to the designated beneficiaries in the event of death, a capital
  • To prepare for retirement with a possible annuity exit

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