Life insurance is a savings product managed by an insurance company where you choose the level and rhythm of your payments. It aims to build you up and grow your capital to achieve your projects.
What differentiates life insurance from other investments is that it allows you to protect your loved ones whom you have designated as beneficiaries. In the event of death, they receive the sums you have saved, valued according to the terms of the contract, at very favorable tax conditions.
However, be careful not to confuse life insurance and death insurance. Life insurance is an investment. The amounts saved on the contract, revalued, are paid to the beneficiary in the event of death. In the case of death insurance, you choose in advance the level of capital that will be paid to the beneficiaries, and you pay a contribution in return.
How the Contract Works
Anyone can take out one or more life insurance policies. Parents can even open a contract on behalf of their minor child. When opening your agreement, you choose the primary operating characteristics. Then throughout the life of your contract, you can modify its main components.
Following your opening request, the insurer will send you a membership certificate. You then have a set withdrawal period, which allows you to withdraw from your contract. The insurer is then required to reimburse you for the total amount paid.
Reasons to Take a Life Insurance Policy
Life insurance is suitable for multiple purposes. It can be a way to save for a project, pay for your children’s studies, prepare for a big trip or a sabbatical, save for a future real estate purchase or finance work, or quite simply to build up gradually a capital. A specific goal is not mandatory.
Life insurance is frequently taken out with a view of preparing for retirement due to its great flexibility and its tax advantages:
- flexibility during the constitution phase of your savings,
- and flexibility also on the terms of exit.
You can recover your savings either in the form of capital or in the form of an annuity and thus build up additional income for life. You can finally use life insurance to protect the future of your loved ones. Indeed, the valued capital is transmitted under very advantageous tax conditions, compared to inheritance transmission, making it a tool for transferring wealth.
All these objectives are compatible: you can save to prepare for a project or your retirement while financially protecting your loved ones in the event of death. The capital is always available when needed (subject to the agreement of the accepting beneficiary). Also, in the event of unforeseen circumstances (dismissal, early retirement, invalidity, cessation of self-employed activity following a court-ordered liquidation judgment), redemptions made under the contract are exempt from income tax.