Understanding life insurance

Understanding life insurance is rather important because, in France, life insurance is the savings product par excellence because it alone accounts for nearly 40% of the outstanding savings of French households. So we try to simply explain the operation to understand life insurance and tried to give the best ranking through our comparator life insurance.

The origins

To understand life insurance, we must go back to a very distant history and some writings that refer to it from the 14th century. This is where his name came from because in the first place it was an insurance that guaranteed the life of the sailors and, in the event of death, paid back to the surviving dependents.

If you are simply looking to get the best ranking without the need to understand life insurance, here are the elements:

Understanding life insurance: the principles

Life insurance is a regulated savings product that has many benefits but also a multitude of options and potentially offers a reduced tax, this is what we will see to understand life insurance. For those who are familiar here is the link Wikipedia life insurance but the definitions are very comprehensive. No less complete but can bring the legal seal, here you will find the detailed sheet given by the public service to understand life insurance.

What type of placement

Life insurance is a savings investment that subscribes to a financial institution. You will have to pay at the opening a minimum amount then you will have the freedom to pay money when you wish.

At the opening, you will have to designate one or more beneficiaries who will receive the amount of your savings plus a possible premium in the event that you die while your life insurance is still in progress. It is advisable to designate several beneficiaries with possibly a notion of priority. Note that you can change the content of the beneficiaries at any time.

But to understand life insurance, know that if nothing happens to you during the life of your life insurance policy, you will recover the amount of it. And that's still the general principle.

 

Understanding the types of life insurance policies

In France, to understand life insurance and save well, it is important to remember that two types of contracts exist:

·         the contracts in euros or mono support contract

·         One and only one background: 1 euro support

·         The product is therefore risk-free and the savings can only increase.

·         This is the privileged contract of the French.

·         unit-linked multi-media contracts

·         This contract can be composed of different funds: support euros and/or units of account.

·         The higher the units of account share in the contract, the greater the risk associated with the contract. We must understand life insurance as a contract whose capital is not guaranteed in this case.

Understanding life insurance: the different options

Your investor profile

Frequently, a test to assess your risk aversion is offered to you when you open a life insurance policy. Do this test (which will be offered by our selected partners, for example, life insurance Boursorama but the others too) because the results will show you the management profile that is most suitable for you.

Understanding life insurance: the different options

Your investor profile

Frequently, a test to assess your risk aversion is offered to you when you open a life insurance policy. Do this test (which will be offered by our selected partners, for example, life insurance Boursorama but the others too) because the results will show you the management profile that is most suitable for you.

prudent profile: the majority of savings invested in euro support

balance profile: around 50% in euros and 50% in units of account

dynamic profile: a majority of savings invested in units of account

It should be noted that the more you take risks, the greater the risk of losses, but on the other hand the higher the expectations of gains. If you go on the riskier profiles, it is no longer a question for you to understand life insurance but it is that you already master it completely.

Management mode

Some companies offer different types of management for their life insurance.

Understanding life insurance and how it is managed means understanding that a ready-to-use contract will be offered based on your knowledge, time and risk aversion.

free management: it is you who manage in total freedom your contract and the funds on which you wish to invest, it is you who can help us to better understand life insurance!

streamlined management: you let the financial experts choose the funds that best match your investor profile.

management under mandate or delegated management: you completely delegate your management to a specialist and you sign a bi-partite contract with him with conditions and objectives. Historically intended for high-end customers, this management method has become more democratic and is now eligible for a larger number (under conditions). For example, we have Fortunéo who proposes it under certain minimum conditions

Each company can name these management methods differently but to understand life insurance, know that generally, these are the most frequent names.

Understanding Life Insurance: Taxation

Compared with PEA or stock market transactions, life insurance has a rather advantageous tax system.

The taxation is different depending on the number of years you leave your money placed on your life insurance. But as soon as you open a life insurance, the more you get a tax envelope. That is, the time begins to count down when the product is opened, regardless of how much money is on it. You can, therefore, benefit from your seniority.

If you withdraw your money between 0 and 8 years after opening your contract.

The capital gains that you have realized on your contract will be subject by default to the progressive income tax. Nevertheless, depending on your tax status, you can opt for the mandatory flat-rate deduction:

from 0 to 4 years: 35% of capital gains

from 5 to 8 years: 15% of capital gains

If you withdraw your money 8 years after the opening of your life insurance policy, include life insurance and its tax benefit, your capital gains are tax-exempt up to the limit of:

4,600 euros a year if you are single, divorced or widowed.

9 200 euros a year if you are a couple.

If you exceed these thresholds, your capital gains will be subject according to your choice to your income tax or to the flat rate deduction at the rate of 7.5%.

Since 2012, capital gains on life insurance contracts have been subject to social security contributions of 15.5%. Note that life insurance also provides benefits in the event of death.

Fees

4 types of fees:

Fees

They are increasingly rare, they are fees that are related to the opening of a life insurance policy.

Payment fees or entrance fees

They are deducted at the time of each new payment on one of your life insurance media.

Arbitration costs

They are deducted at each transfer of a support to another support of your life insurance. These support transfers are called arbitration. To understand life insurance and arbitration fees, you just have to imagine that you will be able to change your investment fund along the way.

Management fees

They are usually collected every year and are proportional to your savings amount.

These fees are an important part of the total costs and must be a key element of comparison between different life insurance. To fully understand life insurance, you should pay particular attention to those fees that will apply each year to all of your principal.

The life insurance market

In France, according to the FSA's 2013 insurance balance sheet, life insurance is:

120 billion euros in collections: 103 in euros and 17 in units of account

an outstanding amount of 1463 billion euros, of which 1203 in euros (82%)

To understand digital life insurance, many reports and studies are available on their website.

The main actors

The product is also interesting for insurance banks because it allows them to have more equity. This is why almost all insurer banks offer this product.

In France, the main actors are:

traditional banks: Crédit Agricole, BNP Paribas, Society General, etc.

Banks online: Boursorama, ING Direct, Fortune, etc.

insurers: AXA, CNP, Generali, etc.