Life insurance is a savings product that allows you to build up capital while benefiting from an advantageous tax framework. It is based on the principle of risk pooling and offers a capital reimbursement guarantee in the event 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 insurer), where the insurer undertakes to pay capital or benefits in the event of the death of the insured or the contract maturity date. In exchange, the insured pays periodic premiums over the life of the contract.
The yield of thelife insurance depends on several factors, including the type of contract, the amount of premiums paid, the duration of the contract and the rate of return guaranteed by the insurer.
The return on life insurance is variable and depends in particular on the economic situation. On average, it is around 3% per year.
Life insurance contracts can be classified into three main categories:
- guaranteed return contracts,
- unit-linked contracts,
- equity contracts.
Guaranteed return contracts are the most common. They offer a guarantee of the capital invested and the interest linked to it. The rate of return is fixed and known in advance.
Unit-linked contracts are less common. They allow you to invest in mutual funds, stocks or other investments. The return is variable and depends on the performance of the investments.
Equity contracts are even less common. They allow you to invest directly in shares. The return is therefore also variable and depends on the performance of 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 earn you on average 25% more than what you have invested.
However, it is important to keep in mind that the average return on life insurance is calculated over a long period and can fluctuate from year to year. Also, past performance is no guarantee of future performance.
The performance of your life insurance depends on several factors, including:
- The performance of funds in euros: funds in euros are generally the safest investment in life insurance and their return is guaranteed by the insurer. However, their return has been capped at 0.50% since January 1, 2015.
- The performance of unit-linked units: unit-linked investments are riskier than euro funds, but they can offer higher returns. However, they are subject to financial market fluctuations and their performance is therefore not guaranteed.
- Management fees: management fees are deducted by the insurer to cover the costs of managing 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 it can fluctuate from year to year and depends on several factors.
This may seem low, but you have to take into account that life insurances are generally long-term investments and their return is guaranteed. Additionally, 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 hazards while benefiting from an attractive return.
However, like all financial products, it has advantages and disadvantages that should be weighed before subscribing to 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. Indeed, in the event of death, the insurer pays the capital to the designated beneficiary, which protects his family.
In addition, life insurance is a tax-efficient investment since earnings are tax-exempt from age 8. Finally, it allows you to benefit from an attractive return, higher than that of 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 since it is generally recommended to subscribe for a minimum period of 8 years to benefit from tax advantages.
Finally, it can be complex to understand for people uninitiated in financial products.
How to 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 if you have a risky profile or not. This will establish the level of risk for your contract. The higher the risk, the higher the returns can be too. However, the risks of losses are also greater.
Life insurance is a contract by which an insurance company tries to guarantee a minimum return to its subscriber. This return is calculated according to various factors including the management fees of 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 establish more advantageous contracts than others. These statistics make it possible to compare the returns of the different contracts 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 available 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.