How does life insurance work?

life insurance

A savings investment and a means of transmission, life insurance is a financial product highly appreciated by the French. Allowing to reconcile provident and optimization of its succession, it is a contract which engages its subscriber to pay periodic contributions (free or fixed). Ultimately, life insurance is a way to grow your money to be able to pay a capital or an annuity to a final beneficiary. Under certain conditions, the life insurance contract is partially or totally exempt from inheritance tax. Do you want to understand how life insurance works  ? The Fondation de France deciphers for you the preferred investment of the French.

The life insurance contract is a medium or long-term savings product which involves:

and one (or more) beneficiary chosen by the policyholder/subscriber who will receive the capital or the annuities (excluding death, this may be the policyholder/subscriber).

When it opens, an initial payment is made. Then, the subscriber has the choice to make payments, regular or not, without limit of amount, in accordance with his contract.

The amount invested in life insurance then benefits from interest, which varies according to the contract and its terms. The rate of remuneration depends on the contract you choose: contract in euros, contract in units of account or multi-support contract.

Can I withdraw from life insurance?

It is possible to make a withdrawal on life insurance or even to close it during your lifetime. However, it is a procedure subject to certain conditions which are themselves different depending on the time spent saving.

Indeed, interest from payments made since September 27, 2017 on a life insurance contract is subject to the  single flat-rate deduction (PFU). This intervenes during the partial or total withdrawal of the sums available on the life insurance contract.

Thus, if the withdrawal occurs less than 8 years after the opening of the life insurance, the single flat-rate deduction will amount to 12.8%.

In the case of a withdrawal occurring 8 years after the opening of the contract, the single flat-rate debit will amount to 7.5% for amounts paid below €150,000.

In addition to the single flat-rate deduction (PFU), 17.2% of social security contributions are added.

A savings and wealth transmission product

As mentioned above, life insurance is a savings product allowing you to capitalize on the long term. When it comes to an end, it can then serve as an additional income or pension for the insured person, through the payment of regular annuities during his lifetime.

It is also an excellent tool for  transmitting financial assets and inheritance. Life insurance offers advantageous taxation and great freedom in the choice of beneficiaries. Thus, if the insured dies while the contract is still in progress, the capital saved will be paid to the beneficiary(ies) designated in the contract, in accordance with its provisions.

Assign your life insurance to an association or foundation

The beneficiary clause allows the subscriber to freely designate the beneficiaries of his life insurance, whether they are related to him or not. He can also modify these beneficiaries as soon as he wishes, by contacting his insurer. As a result, the insured/subscriber can designate a legal person but can also assign his life insurance to a foundation or association which will receive the financial capital on his death.

In this case, the subscriber can indicate, in his life insurance contract, details of allocation to be respected by the beneficiary organization. Thus, if the Fondation de France becomes the beneficiary of life insurance, the contract may stipulate that the payment of the capital be made for a particular cause, such as childhood, or precariousness for example.

To find out more about the ways to pass on your life insurance to the Fondation de France , our experts are at your disposal and offer you tailor-made solutions, adapted to your assets. Thanks to this support, you will have the assurance that your project will be respected.



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