This contract can, in fact, be relevant if you wish to finance a medium or long-term project or prepare for your retirement. Life insurance makes it possible to carry out many projects within an attractive tax framework: the creation and enhancement of capital, the transmission of capital in a secure manner, preparation for retirement and savings. Is this contract suitable for small budgets? Why favor it over another savings product? Here are some answers.
What is the principle of life insurance?
Life insurance is a financial investment. It offers its holder the possibility of saving money in order to pass it on to a beneficiary in the event of death or to take advantage of the savings accumulated at any time or specifically at the time of retirement in the form of an annuity or capital.
Indeed, in the event of the life of the subscriber, the latter remains the beneficiary and the holder of the funds. He is free to recover the capital whenever he wishes. In the event of death, the contract will be settled and the capital as well as the interest will be transferred to the designated beneficiaries, who may be the children, the spouse or the partner, the brothers or the sisters, or a third party.
The opening of the contract is done through an initial payment. Thereafter, it is possible to make regular or irregular payments, with no limit on the amount. This savings product also offers its subscriber the possibility of receiving interest, which depends on the capital invested and the contract.
Life insurance is therefore a savings contract which benefits from the advantages of the taxation of life insurance combined with those linked to the transmission of assets. The contracts are thus opened with the aim of preparing for retirement, building up capital over time or anticipating a real estate project.
Two main types of contracts
With a monosupport contract in euros, all sums placed by the subscriber are invested in secure and guaranteed funds (this is called the euro fund). In other words, when you invest your money in a fund in euros, the sum is placed in risk-free products such as corporate bonds or government bonds that are revalued each year. Thus, your capital is guaranteed at all times. Accumulated interest is also acquired.
Multi-support contracts
Conversely, on a multi-support contract, the capital is not guaranteed. The saver, in this case, invests in different media, which can be funds in euros or units of account. Multi-support life insurance contracts are generally made up of unit-linked funds (shares, SICAVs, FCP units, etc.) and funds in euros.
In the event of a fall in the financial markets, these supports can generate negative returns, ie a capital loss, which results in a loss of the capital invested by the subscriber of the contract. This investment is more risky compared to the monosupport contract in euros, but may prove to be more profitable depending on the market trend.
Benefits of life insurance compared to other savings products
Life insurance allows you to build capital over the medium or long term. You can, at any time, recover your capital, close your contract and withdraw the money deposited plus net interest less costs and any taxes provided for by the regulations. Be careful though, because you are not guaranteed to get back your entire bet if you invest in units of account (UC).
This is an effective way to supplement your income, especially at retirement, through regular withdrawals or the conversion of your capital into a life annuity. Life insurance is also an excellent tool for transmitting assets, thanks to its particularly advantageous taxation and great freedom in the choice of beneficiaries. The contract may prove to be more profitable than other traditional savings products, such as the Livret A, remunerated at 1% since February 1, 2022
Are you wondering if it is possible to save on a life insurance contract despite a small budget ? The answer is yes ! However, for the operation to be interesting, it is necessary to take a date. “Making a date” in terms of life insurance means opening a contract by immobilizing the minimum in it, in order to be able, in 8 years, to have a very advantageous tax envelope to invest money in, even for a limited duration.
In the same way, with an average income, you will be more inclined to be careful, to weigh your purchasing decisions and to reduce your unnecessary acquisitions. It’s all about attitude and money management. Even if the sum seems ridiculous to you, it is better to set aside 30 € monthly, rather than zero. Save from the beginning of the month and always think long term.
Some tips for choosing your life insurance policy
There is a plethoric offer in life insurance: thousands of contracts compete . Choosing the most suitable contract for your objective is not always easy. To do this, you have to ask yourself the right questions: are you ready to lose capital? If so, you can consider moving towards a multi-support contract . Otherwise, the mono-support contract will be more suitable.
Also ask yourself about the fees that apply to the payments by calculating your net return: performance less fees . Consult the past performance history of the contract you are interested in. Even if past performance has no influence on future performance, this study can give you indications on the quality of management. Opt for a contract that offers you a number of supports adapted to your investment wishes: some life insurance contracts offer more than 500 funds, others no more than twenty.
In short, life insurance is an advantageous product in many ways. However, it is important to know how to select your contract carefully. The latter must correspond in all respects to your ambitions and your main objectives.