6 reasons to take out a life insurance policy

life insurance policy

Life insurance is a real Swiss army knife in terms of wealth management. It responds to both savings and transmission concerns while benefiting from tax advantages.

Acquiring a residence, financing the studies of one’s children, preparing for retirement or even anticipating the transmission of one’s assets, life insurance makes it possible, thanks to a flexible operation, to meet each objective with a favorable tax regime.

Build up savings available at your own pace

Life insurance is, first and foremost, a tool designed to grow your savings and enjoy them during your lifetime. The flexibility of its operation makes it accessible to all, modest savers as well as wealthier savers.

You pay what you want, when you want. Apart from a minimum payment on subscription (variable according to the contracts) , you then feed it at your convenience with one-off or regular, small or large payments.

For redemptions, you can redeem all or part of the funds at any time. The money is not blocked, although it is preferable to wait for the 8 years of the contract to fully benefit from its tax advantages.

Access to diversified investment vehicles

From funds in euros to riskier shares, via bonds or real estate SCPs, the investment vehicles offered in multi-support contracts are now extensive (variable according to the contracts and the insurers). Thus, depending on your investor profile (cautious, moderate, risky), you can compose your life insurance according to your expectations and your investment horizon . And if you don’t have the time or the knowledge to make this selection, benefit from the expertise of a specialized team thanks to discretionary management.

Benefit from advantageous taxation

On a contract of more than 8 years, redemptions are only taxed if the share of interest exceeds the annual allowance of €4,600 (€9,200 for a couple). Beyond that, they are taxed at 7.50% and 12.80% for the part of payments over €150,000 (rule for payments made after September 26, 2017). You can also choose to include the taxable part of the interest in your income tax.

Redemptions made before the 8 years of the contract are taxed at 12.80% or according to the progressive scale of income tax.

To this must be added 17.2% of social security contributions (CSG, CRDS and solidarity levy). They are deducted each year for funds in euros and during redemptions for units of account. ( 1 ) ( 2 )

Have regular retirement income

You can receive your capital by means of scheduled partial redemptions or annuities spread over time.

Depending on the contracts, you can ask to convert your capital into a life annuity . The capital is definitively acquired by the insurer, who in exchange pays you income for life. The pension is calculated on the basis of your savings, your age and your life expectancy at the time of conversion.

You can also opt for regular partial redemptions . This solution has the advantage of allowing you to receive capital at regular intervals while leaving capital to the beneficiaries designated in the contract. It is preferable to wait for the 8 years of the contract to take advantage of the tax advantages linked to redemptions.

Transmit capital freely

You have virtual freedom in the drafting of the beneficiary clause , that is to say in the designation of the people who will receive your capital in the event of death (the beneficiaries). However, doctors, nurses, ministers of religion who accompanied you during your last illness are excluded.

It is the flagship tool for transmitting to relatives who do not have the status of heirs or do not appear in the first ranks and thus find themselves heavily taxed in the context of an inheritance: cohabitant, brothers and sisters, grandchildren… For example, between brothers and sisters, inheritance tax amounts to 35% and 45%, cohabitants are taxed at 60% as third parties.

You can change the beneficiary(ies) of your contracts at any time . Be careful however, if the current beneficiary has accepted the benefit of the contract, you can no longer modify the clause without his agreement.

Take advantage of favorable tax conditions in the event of death

This is the major advantage of this investment, which often makes it essential in a global reflection of heritage transmission.

If you fund your contract(s) before you turn 70, you can pass on up to €152,500 per beneficiary free of inheritance tax. Beyond that, a flat rate of 20% applies up to €700,000, then it increases to 31.25%. For example, if you nominate your two children, they can receive up to €305,000 without paying anything.

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