Life insurance

The vocation of origin of the life insurances is to guarantee the payment of a certain amount of money (capital or Rente) when occurs an event related to the assured one: its death or its survival. It is advisable nevertheless to make the distinction between the insurance in the event of death known as “life insurance” which pays the capital or the revenue in the event of death and the insurance in the event of life (also called life insurance), which pays a capital or a revenue in the event of life in the term of the contract (if death before the expiry nothing is due to the succession). The insurance in the event of life is a contract seldom used in a way isolated in France.

What is usually called “insurance life” in France is a double contract of life insurance and insurance in the event of life over one single duration. This makes it possible to present quasi produced of saving, equipped with the tax incentives of the insurance.

The insurance life also makes it possible to make bear fruit funds while pursuing a long-term goal: the retirement, a real investment, etc It offers also important tax incentives as regards succession.

A contract of life insurance must have one limited duration with the subscription, renewable or not according to the contracts by year extension by year.

Involved actors

the subscriber: it is that which engages towards the insurer, it is the owner of the contract and chooses the recipients in the event of death;
the policy-holder: it is the person on whom the risk (death) rests, it must be agreeing for the insurances in the event of death, it is him which fills out the medical questionnaire if necessary;
the recipient: in the event of life the subscriber is generally the recipient, in the event of death he is that which was designated by the subscriber. He can be directly indicated (name, first name) or indirectly (the spouse, children, etc) but a clause appearing apart from the contract is also valid (on a will or deposited at the notary by notarial act).

Supports of investment

One distinguishes two types of contract:

contracts in euros;
the contracts multimedia, which comprise at the same time funds in euros and Units of Account.

The sums paid on a contract in euros, just like those placed on the funds in euros of a multimedia contract, are guaranteed by the insurer: they cannot drop and are revalorized each year of an interest; the participation in the profits (sometimes made up of a known guaranteed minimum rate in advance and of a known fluctuating rate at the end of the year). N the other hand of this safety, the profits are generally limited.

The Units of Account available on the contracts multimedia can be financial credit of any type (generally of the funds in actions or bond-holders). It is the insurer who determines the Units of Account suggested for each contract. The sums invested on the Units of Account are not guaranteed and present thus a risk for the subscriber.

Management styles

The subscriber can choose between several management styles suggested in the multimedia contracts:

shaped management: the subscriber leaves to the financial experts the care to choose the values and the distribution of credits (actions, obligations, etc) according to the profile which it determined, of most careful with most dynamic;
free management: the subscriber chooses to him even the funds on which it will invest;
management at horizon, or controlled: the distribution between the classes of credits is done according to a diagram depend on the age of the subscriber, very risky at the increasingly sedentary beginning then when the contract comes to a end.

Collective agreements

The majority of the contracts suggested on the market are known as collective : the policy-holder is represented near the insurer by an association of policy-holders. Any change of the contract is done then by negotiation between the insurer and association. By opposition, the individual contracts signed directly between insurer and subscriber, and any change of the contract can consequently be done only with the preliminary assent of the subscriber.

Although an individual contract is thus more making safe for the subscriber, it increases also the risk which the insurer gives up modernizing regularly his contract (addition of new supports of investments, by new services, lowers certain expenses, etc).

Expenses

The expenses which one usually finds in a contract of insurance life are often expressed expressed as a percentage invested sums and can be:

of the deposit charges (or general overheads), versed only once at the time of the payment of the funds;
of the overheads, paid annually on the sums in account;
of the expenses of arbitration, paid in the event of change of the supports of investment in a multimedia contract.

In France, the emergence of brokers and online banking led to the appearance of contracts with reduced expenses, with often the removal of deposit charges and of the overheads a little more moderate (about 1% per annum).

Attention, in addition to the overheads on the level of the contract of insurance life, the customer is also indebted overheads of the funds of investment which it chooses within the contract (and also expenses of transaction of these funds). On the whole, it is about 3.5% of annual expenses which are collected by financial industry with the detriment of the customer.

Tax mode

In France, the tax mode of the insurance life was particularly advantageous but however knew with the wire of the last years of the important restrictions.

The profits drawn from a contract of insurance life are imposed only in the event of repurchase (withdrawal of funds), total or partial. They are calculated with the proportion withdrawn sums: by repurchasing 10% of the total of the contract, the imposition will be done only on 10% of the interests generated since its opening.

The open contracts or payments carried out since 1998, the taxpayer can choose either integration with the income tax of his profits, or for a levy at source according to following scale:

The abatement of 4600€ (on the fraction of the withdrawal corresponding to the profits, the fraction corresponding to the payments is not taxed) is acquired whatever the choice of imposition (IR or Levy at source) for the whole of the contracts of the taxpayer. To avoid the tax, it is judicious to make an annual withdrawal whose interests do not exceed the amount of the abatement. Is added to this imposition of the social samples (of 11% in 2006) taken either annually on a contract in euros, or at the time of a repurchase on the multimedia contracts (what is more advantageous).

There exist circumstances of repurchase which exonerate taxation: dismissal, put at the early withdrawal, disability of 2nd or 3rd category. The event exonerator must take place in the financial year of the repurchase.

A contract of life insurance enters the plate of the Solidarity tax on fortune. To note that contrary to a tax envelope such as for example PEA, there does not exist ceiling of payment nor of restriction on the withdrawals or payments.

In the event of life annuity. This one will be subjected to the income tax for 70% of its amount in the event of startup before 50 years, for 50% from 50 to 59 years, for 40% from 60 to 69 years, for 30% to 70 years and more. It will be also prone to the social samples.

The tax mode of the insurance life is different abroad for the alive French (expatriates), in this case there is in the majority of the cases a convention between France and the country concerned to avoid a double taxation: Taxation of the insurance life for the nonresident ones

Successional mode

At the time of the opening of a contract of life insurance, the subscriber can designate recipients. In the event of death of the policy-holder, the recipients receive the entirety of the capital with a successional taxation which depends on:

the date of opening of the contract
the date of payment of the premiums
the age of the subscriber

These various cases are summarized in the table below:

See too

Standard of contracts of insurances
Contract of capitalization

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