Life insurance is a savings product that allows you to build up capital and at the same time benefit from a favorable tax framework. It is based on the principle of risk pool and offers a capital repayment guarantee in case of death.
Life insurance: a contract to protect loved ones
Life insurance is a contract between a person (the insured) and an insurance company (the insurance company), where the insurance company undertakes to pay capital or benefits in the event of the insured’s death or the contract’s expiry date. In return, the insured pays periodic premiums during the term of the contract.
The yield oflife insurance depends on several factors, including the type of contract, the amount of premiums paid, the duration of the contract and the return guaranteed by the insurance company.
The return on life insurance is variable and depends in particular on the financial situation. On average, it is about 3% per year.
Life insurance contracts can be classified into three main categories:
- guaranteed return contracts,
- unit-linked contracts,
- share contracts.
Guaranteed return contracts are the most common. They offer a guarantee for the invested capital and the associated interest. The rate of return is fixed and known in advance.
Unit-linked contracts are less common. They allow you to invest in mutual funds, shares or other investments. The return is variable and depends on the investment’s performance.
Equity contracts are even less common. They allow you to invest directly in shares. The return is therefore also variable and depends on developments on the stock market.
The average return on life insurance: an interesting investment?
The average return on life insurance is 2.5 to 3% per year. This means that over a 10-year period, your savings will give you an average of 25% more than you have invested.
However, it is important to remember that the average return on life insurance is calculated over a long period of time and can fluctuate from year to year. Past results are also no guarantee of future results.
The benefit of your life insurance depends on several factors, including:
- The results of the funds in euros: funds in euros are generally the safest investment in life insurance and their returns are guaranteed by the insurance company. However, their returns have been capped at 0.50% since January 1, 2015.
- The development of unit-linked units: unit-linked investments are riskier than euro funds, but they can give higher returns. However, they are subject to fluctuations in the financial markets and their results are therefore not guaranteed.
- Administration Fees: Administration fees are deducted by the insurance company to cover the cost of administering the life insurance contract. They are generally between 0.50% and 1% per year.
In summary, the average return on life insurance is 2.5% per year, but this can fluctuate from year to year and depends on several factors.
This may seem low, but you need to take into account that life insurance policies are generally long-term investments and their returns are guaranteed. In addition, life insurance is often used as a form of tax-efficient investment, which can increase the net return on investment.
An advantageous savings product
Life insurance is a savings product that provides protection against certain life risks and at the same time benefits from an attractive return.
However, like all financial products, it has advantages and disadvantages that should be weighed before signing a contract.
The benefits of life insurance
Life insurance has several advantages that make it an attractive investment. First of all, it provides protection against certain risks, such as job loss or death. In case of death, the insurance company actually pays the capital to the designated beneficiary which protects his family.
In addition, life insurance is a tax-efficient investment since income is tax-free from the age of 8. Finally, it allows you to benefit from an attractive rate of return that is higher than traditional savings accounts.
The disadvantages of life insurance
However, life insurance also has some disadvantages. First, it is subject to management fees, which can significantly reduce the final return.
In addition, it is a long-term investment, as it is generally recommended to subscribe for a minimum period of 8 years to get tax benefits.
Finally, it can be complex to understand for people who are not privy to financial products.
How do you choose your life insurance?
When you take out life insurance, you place part of your savings in a contract that guarantees you a minimum return. However, this return is not fixed and may fluctuate depending on market trends.
To choose your life insurance, you need to know whether you have a risk profile or not. This will determine the risk level of your contract. The higher the risk, the higher the return can also be. However, the risk of loss is also greater.
Life insurance is a contract whereby an insurance company tries to guarantee a minimum return to its subscriber. This return is calculated based on various factors, including management fees for the contract and the duration of the investment. In general, the longer the investment, the higher the return.
Regularly, the statistics published by the insurance companies make it possible to conclude more advantageous contracts than others. These statistics make it possible to compare the returns of the different contracts in order to choose the right one. It is important to note that these returns are not guaranteed and may fluctuate.
To choose your contract, you must compare the different offers on the market. You can use online comparators to easily find the best deal. It’s also important to consider your long-term financial goals and choose the type of investment that’s right for you.
