Definition of life insurance
A life insurance contract is an insurance contract whose risk, object of the contract, depends on the duration of human life.
In return for premiums paid by the policyholder , whether the subscriber (individual contract) or the member (collective contract), the insurance company or the insurer undertakes to pay a capital or an annuity to one or more persons named beneficiary (ies) when the risk occurs. Namely either the death of the insured or on the contrary the survival of the latter at a given term.
Therefore, life insurance includes both insurance in the event of death , payment of funds on the death of the insured, and insurance in the event of life , payment of funds if the insured is alive on a date determined.
The subscriber or member
Person who pays the premiums to the insurer. This is the reason why it has two prerogatives: the choice of beneficiary and the option of redemption.
A joint subscription is possible. In this case, one or more people will take out a life insurance contract together.
The subscriber can also be a bank, an association or a company when it comes to group insurance. In this case, the subscriber has the power to modify the contract (article L. 141-4 of the insurance code).
Person on whose head the risk weighs: the one whose survival or death will trigger the insurer’s guarantee. Very often, the subscriber (or member) and the insured are the same person.
The subscription of insurance in the event of death on the head of a third party requires that said third party expressly consents to the operation. If this consent is not obtained in writing, the contract will be void (article L. 132-2 of the insurance code). Indeed, one cannot stipulate on the death of someone without his agreement.
It is also prohibited to take out death insurance on the head of a child under the age of 12, of an adult under guardianship or of a person placed in a psychiatric hospitalization establishment (article L. 132-3 paragraphs 1 and 2 of the insurance code).
Person designated by the subscriber to receive the capital or the annuity on the occurrence of the risk. He does not have to be present when the contract is signed. But if there is no designated beneficiary on the death of the insured, the insurer will not keep the capital: it will revert to the heirs of the insured, but will then be subject to inheritance tax in certain case.
Please note: in certain formulas or categories of contract, the subscriber, the insured and the beneficiary may be the same person. Example: supplementary pension contract.
The different forms of contracts
Multiple contracts are likely to be offered to you on the market. Be careful when subscribing to check whether these contracts are in line with your interests and your financial wishes.
Three main categories are likely to be encountered:
The insurer undertakes to pay a lump sum or an annuity in the event of the death of the insured to one or more recipients. Two types of contracts are offered:
The insurer pays, on the death of the access, a capital or an annuity to one or more beneficiaries when the death occurs during a determined period fixed in the contract.
Eg: education annuity contract: one or the parents of a student take out a temporary insurance contract which allows, in the event of their death, to finance the continuation of their child’s studies in the form of an annuity.
Whole life insurance
The insurer pays a guaranteed capital in the event of death regardless of the date on which the death occurs. This contract allows the subscriber to build up savings for the benefit of a named beneficiary. This is a contract that aims to transfer assets.
The insurer undertakes to pay a lump sum or an annuity to the insured if he is alive at the end or at the end of the contract.
If the purpose of the insurance is the payment of an annuity , it is mainly a supplementary pension contract.
If the purpose of the insurance is to pay a capital, the rule is simple: the insurer delivers the capital if the insured is alive on a date determined at the time of subscription. If the insured dies before the determined date, the funds are lost.