What is life insurance?
A life insurance policy is a financial investment and a savings solution allowing the subscriber to build up and enhance capital. The main feature of this investment is that it allows you to designate one or more beneficiaries in the event of the death of the insured. It then becomes an instrument for transmitting capital and protecting loved ones.
Definition of life insurance players
In order to fully understand how life insurance works, it is first necessary to define the terms used and the role of each:
- The subscriber: is a natural person, adult and capable, who signs the subscription form, chooses the characteristics of his contract, and designates the beneficiary in the event of death
- The insured: is the natural person on whom the risk guaranteed by the insurer is based. His death or his survival at a given moment determines the benefit of the insurer. The insured is generally the same person as the subscriber
- The beneficiary: in the event of survival, this is the policyholder; in the event of death, it is the person(s) designated by the subscriber to receive the benefit provided in the event of the death of the insured
- The insurer: is a legal person whose role is to cover the risk and to pay the guaranteed benefits if the risk materializes
Who can take out life insurance?
Any adult can take out a life insurance contract. However, the subscriber must satisfy the rules relating to the capacity to contract. For persons placed under a legal protection regime (tutorship, curatorship, etc.), the subscription and management procedures may be more or less restrictive:
- For a person placed under a protective measure of justice, the adult can subscribe and manage his contract alone. There is nevertheless a system of protection a posteriori according to which all the acts performed can be called into question.
- For persons placed under curatorship, the protected adult can take out and manage a life insurance contract with the assistance of the curator. The latter assists the adult so as not to call into question the validity of the acts.
- For persons placed under guardianship, the protected adult must be represented for all acts. He cannot, therefore, take out or manage the life insurance contract alone. The authorization of the guardianship judge or the family council is necessary.
Finally, for young subscribers, minors: in the presence of both parents exercising parental authority, the terms of subscription and management of life insurance are quite simple since both can intervene. Since January 1, 2016, the parent exercising parental authority alone now has the same powers as the parents who exercise it jointly.
Where to buy life insurance?
The modes of distribution of life insurance contracts are varied, but they are developed and guaranteed only by 3 types of structures that must have received state approval: insurance companies, mutual insurance companies, and provident institutions.
What is special about life insurance?
Life insurance is an atypical investment thanks to the stipulation for others. This option makes it possible to designate one or more beneficiaries of the sums of money deposited in the event of the death of the insured.
What are the benefits of life insurance?
The life insurance contract can meet several needs:
- Build up savings
- Valuing existing savings
- Protecting loved ones by transferring capital to a natural or legal person (for example, it is possible to designate an association as a beneficiary of their contract)
- Provide collateral for a loan
- Prepare future additional income (for example for retirement)
- Receive immediate additional income by setting up scheduled redemptions or an annuity
What are the benefits of life insurance?
Life insurance has several advantages:
This is an investment that offers flexible savings conditions: the initial payments are often low and additional payments, free, are possible by respecting the minimum payment imposed by the general conditions.
It is a scalable investment that can adapt to an investment horizon, to changes in the policyholder’s objectives and priorities, and to their risk tolerance.
Savings remain available; it is possible to make partial withdrawals, called surrenders, or to surrender the entire contract at any time. The money is not blocked (except for particular supports). The existing brake sometimes is the taxation which will possibly be due on the products contained in the repurchase carried out.
In the event of death, life insurance is an investment outside the estate, in fact, according to the insurance code, the stipulated capital or annuity payable upon the death of the insured to a specific beneficiary or to his heirs are not part of the estate of the insured, they are “outside the estate”. Life insurance also makes it possible to favor one or more relatives of the insured subscriber, even outside the family circle.
When to buy life insurance?
There is no minimum or ideal age required to take out a life insurance policy. Depending on the objective, the needs, and the age of the subscriber, the contract may be set up in order to cover his beneficiaries, to build up capital by starting the construction of heritage, to benefit from advantageous taxation, etc
Up to what age can you take out life insurance?
Just like the fact that there is no minimum age to take out a life insurance contract, there is no maximum age either. It is important to note that the threshold of 70 years of the subscriber, the tax regime of the life insurance contract changes.