A financial investment highly appreciated by the French, life insurance is aimed at all individuals who wish to save and grow their capital for the realization of a specific project. At the end of the contract, the insured can thus recover his funds (with interest) to then embark on other investments.
First and foremost, it’s good to know that life insurance and death insurance are completely separate fields. In the case of death insurance, the contract opened in the name of the insured will be terminated upon the latter’s death. Then, the principal and the interest will return to the beneficiaries designated by the subscriber. How exactly does a life insurance contract work?
Understanding the principle of a life insurance contract
In a life insurance contract, policyholders fully commit to paying a capital for 8 years, and in return, they receive premiums. The funds invested can be used as a savings product for the medium or long term. The payments can also be made regularly or not, according to the choice of the insured. Of course, they have the right to make withdrawals at any time. Likewise, they can also terminate their contracts at any time. In short, the holders of a life insurance contract can opt for free or delegated management, and they have the possibility of subscribing to automatic management options to make their investment successful.
The objectives of life insurance
Whether in single-carrier contracts in euros or multi-carrier, life insurance’s first objective is to help savers build up capital over the long term. Then, it also aims to supplement the income of the insured, when they are retired or when they want to make regular purchases, life annuities, or even advances. Finally, life insurance is a good instrument for transmitting wealth. While taking advantage of an advantageous tax system, it allows policyholders to freely transfer their capital to their relatives (the beneficiaries of the contract).
All about the fees to pay in a life insurance contract
To allow policyholders to better manage their life insurance contracts, the fees to pay in this type of investment are as follows:
- Fixed administration fees and payable at the time of subscription to the contract.
- Entry charges levied during payments, at the opening or during the contract. These fees are fixed or proportional to the amount of sums paid each time.
- Management fees charged throughout the contract.
- Arbitrage fees levied on the amount of money that is transferred from one unit of account to another. These fees are fixed or proportional to the funds transferred.
What he does know about taxation
The holders of a life insurance contract will benefit from an income tax exemption, only if they do not touch their contracts for 8 years. After this period, the taxation is even more interesting, given that the withholding tax is set at a rate of 7.5% with an annual allowance of 4,600 euros in interest.