Life insurance is the preferred investment in the USA. Both a tax envelope, a savings product, and a formidable tool for optimizing the estate, life insurance has many advantages. However, there are hundreds of contracts with rates of return that vary from simple to triple. What is the best life insurance? Which actor offers the best returns? Here is our unique comparison of the best life insurance in 2023.
Summary
- Why buy life insurance?
- How to open life insurance?
- How to choose the best life insurance policy?
- What is the taxation when buying life insurance?
- What is the taxation of life insurance on the death of the insured?
- What are the life insurance investment vehicles?
- How much does life insurance cost?
- How does a life insurance contract work?
- What are the supports of a life insurance contract?
- How to manage your life insurance policy?
- What is the duration of life insurance?
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| What is the best life Insurance? |
Why buy life insurance?
- Life insurance is a savings product
A life insurance contract is primarily a savings product, that is to say, it allows you to invest – and see it grow – capital, to yield. As a general rule, the profitability is much higher than other traditional savings contracts such as the livret A, even if you do not want to take risks. You choose the amount of your investment and the method of payment:
The single premium
You make a single contribution when subscribing, for example, if you have a sum to invest following an inheritance;
Periodic bonuses
You choose a schedule and make regular payments;
Free payments
Once the first contribution has been made, you increase your capital when you have cash to invest.
The minimum contribution varies according to the insurer or the bank, but in general, starts at 100 €. There is no payment limit.
- Life insurance is a capitalization contract:
your payments will produce interest, gains, or capital gains, higher or lower depending on the level of risk you are willing to accept. Depending on your saver profile, the money can be invested:
- Only on a secure but low-yielding fund:
The euro fund. We then speak of a "mono-support" contract, where the capital is guaranteed;
- Only on riskier products:
Units of account (mutual funds, real estate investment company, etc.); on the 2 at the same time, according to the distribution that you choose. We then speak of a “multi-support” contract, which is very interesting with a view to diversifying your assets.
Life insurance has a tax interest
Life insurance is a “tax envelope”. Concretely, it is very interesting in this respect, whatever the amount invested. During the life of the contract, the gains generated by your deposits will not be taxed until you withdraw money. Only social security contributions will be deducted each year from the interest produced by the euro fund if all or part of your capital is placed on this secure and guaranteed support.
The sum of your payments (i.e. your capital) will not be taxed in the event of partial or total life insurance redemption. In addition, your earnings may also not be, depending on the age of your contract: in fact, the older it is, the more attractive it becomes from a tax point of view.
Life insurance to transfer capital
In addition, and this is the other interest of life insurance, you can transfer capital on your death to one or more beneficiaries under conditions, again, advantageous in terms of taxation. The capital you have built up on your life insurance, as well as the products generated, may not be included in the estate on your death. It will be treated separately on the tax level: the taxation of life insurance will be softer and reductions are planned. Taxation will therefore always be less than if the amount had been subject to traditional inheritance tax (which can go, for example, up to 60% for third parties).
In concrete terms, the value of your life insurance will be transferred to the beneficiary(ies) you have designated via the "beneficiary clause". You enjoy total freedom as to the choice of your beneficiaries: you can name your heirs or, on the contrary, favor someone else. This may be one (or more) natural or legal person, such as, among others:
- your spouse
- your children
- some thirds
- an association
You can change the beneficiary at any time unless the latter has accepted the benefit of your contract in compliance with legal formalism. If you do not designate anyone, the standard clause will apply to your spouse, and failing that, your born or unborn children.
How to open life insurance?
Today, the banking network captures a significant share of life insurance outstandings. However, many incumbent insurers offer excellent contracts, and other Internet-only players – such as online banks – can also sell very successful contracts.
Given the diversity and heterogeneity of the contracts available in this very competitive market, simplify your task thanks to our comparator and do an online life insurance simulation!
There is no age to open up for life insurance, whether with a bank, an insurer, or a mutual insurance company. Your contract will follow you until your death, an event which will trigger the transmission of the capital to your beneficiary(ies). However, we advise you to take out life insurance as soon as possible, to “take a date”. Knowing that the taxation of this contract becomes more and more interesting over the years, you might as well subscribe to it quickly, even if you can only invest €100. Don't wait to be able to make a large payment: the tax advantages start from the 1st day.
Signing up for your life insurance is simple. You will need to make a first payment and bear any entry fees. You will have to decide on the distribution of the capital, according to your risk profile:
- euro funds
- unit-linked funds
- a mixture of the two
Several types of profiles/management methods will be offered to you. Subscription is possible as a single or joint subscription.
How to choose the best life insurance policy?
Once the life insurance comparison has been carried out by our online tool, all you have to do is study the 3 or 4 "best" offers received. Here are, in our opinion, the main elements to pay attention to during your life insurance simulation:
- What is the profitability of each contract over the past years?
- What are the management modes available (profiled, free, horizon management)?
- What are the possible arbitration options?
- What is the level of fees charged (payment fees, management fees)?
- If you want to invest part of your capital in financial products, what types of units of account are available?
- What are the terms and minimum payment amounts?
To help you find your way among the life insurance contracts available to you, we have created the ranking tool that you will find at the top of the page. We have taken into account life insurance in euro funds and managed management only, the returns are indicated net of management fees, social and tax deductions.
What is the taxation when buying life insurance?
- The tax base when buying life insurance
On a life insurance contract, your money is not blocked. You can request a partial or total redemption at any time. Whether there is a withdrawal or not, your capital continues to generate gains every year. However, the interest on the euro fund will be subject to social security contributions each year (17.2%). If you hold a unit-linked contract, they will only be charged in the event of redemption.
In terms of redemption in life insurance, it must be understood that only the products (ie gains, interest, or capital gains) will be taxed. The capital (ie the total sum that you will have paid yourself) will never suffer the slightest puncture: your payments are not included in the “tax base”.
What is the taxation of life insurance on the death of the insured?
Life insurance allows you to transfer capital to a beneficiary following your death, under favorable tax conditions. Indeed, it will (in most cases) be treated outside the estate. For example, if you wish to pay capital to a friend following your death, be aware that the inheritance costs will be 60% for third parties. Life insurance is therefore a much more attractive solution. Remember to mention it in the dedicated clause!
The taxation of the capital that will be returned to the beneficiary(ies) will depend on:
- the age of the contract (whether it was signed before or after 1991);
- the date of the payments (before or after 1998);
- the subscriber's age at the time he paid the premiums;
- the amount of capital transferred.
Some old contracts are completely exempt. If you have life insurance dating from the 80s/90s, keep it! There will be no taxation on death, either on the capital or on the gains. For more recent contracts, the most important distinction is the age of the insured at the time of the payments:
For premiums paid before the age of 70, the allowance of €152,500 for each beneficiary is an interesting tax advantage, as is the fact that the tax is "only" 20% for the following €700,000 (and 31.25% beyond);
For premiums paid after age 70, there is only one single reduction of €30,500, common to all beneficiaries (and applicable only once, even if you have several life insurance policies). The gains will be totally exempt, but the share of capital exceeding €30,500 will be reintegrated into the estate of the deceased insured, and taxed based on the inheritance rights in force (depending on the relationship).
What is the duration of life insurance?
- The life insurance contract can be for a life
Even if the savings invested are available at any time, life insurance remains a long-term-oriented product, due to its increasingly advantageous taxation over the years. We often talk about whole life insurance. Many savers imagine that a life insurance contract lasts 8 years.
This is not the case:
The contract will be renewed by tacit agreement until its outcome, that is to say, in most cases, on the death of the subscriber (or the insured, if not the same person). The capital will then be transferred to the designated beneficiary(ies), and it is at this time that the contract will end.
From a tax point of view, a life insurance contract will have a certain interest from the first year (especially if it is opened today). After 4 years, it will be even more profitable and after 8 years, it will produce all its effects (annual tax allowance on interest, reduced flat-rate deduction rate, etc.).
Termination of a life insurance policy
Most frequently, the life insurance contract ends on the death of the policyholder/insured. The natural or legal person(s) designated in the beneficiary clause then receives the death benefit under favorable tax conditions, life insurance being most of the time treated excluding inheritance (for the portion of premiums paid before age 70).
There are also term life insurance contracts, which will end in “case of life”, ie before the death of the insured “. If your contract provides for a term "in case of life", know that you can in principle extend it and that failing that, the exit will be in capital or annuity.
The insurer can also terminate your life insurance contract if you do not pay the periodic premiums provided at the time of subscription.
Life insurance can finally end before this deadline in the event of total surrender (which is equivalent to termination): the contract will end and the tax priority will be lost.
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