In recent months, collections on life insurance contracts have been declining. One of the reasons for this lack of interest can be explained by the downward trend in the performance of euro funds. Despite this, is life insurance still an attractive investment? This is the question we will answer after reviewing the characteristics of life insurance.
The characteristics of life insurance
Life insurance is a savings product that allows you to invest your money in the short, medium and long term. Contrary to popular belief, capital is not blocked. And you can pour at your own pace, at any time, from birth.
So-called "multi-vehicle" life insurance contracts make it possible to invest in different vehicles: euro funds, but also units of account. Units of account group together different asset classes: diversified funds, equity funds, money market funds, bond funds, etc. There are also units of account supports for investing in real estate, these supports take the name of “paper stone”, for example real estate investment companies (SCPI) and collective real estate investment organizations (OPCI) .
Life insurance makes it possible to position ourselves in all existing asset classes, with the possible exception of private equity. And again, things are changing, certain investment funds specializing in this theme are now available on certain contracts. This is one of the things to know: the choice of units of account and their qualities vary greatly from contract to contract. For find the best life insurance, you have to consult the comparisons, and look in detail at the characteristics of the contracts. Some life insurances list more than a thousand units of account while other contracts are satisfied with fifteen.
In addition to access to a wide range of media and asset classes, the second strong point of life insurance is its taxation.
Life insurance is a capitalizing envelope.This means that the saver can reinvest (capitalize) the gains and interest generated over time within the envelope without suffering tax friction.This advantage does not seem like much, but over a long period, this lack of taxation over time can boost the growth of wealth by taking full advantage of the virtuous circle of compound interest.The capitalized gains add to the outstanding amount, which generates more interest the following year, and so on.In detail, only social security contributions on earnings from euro funds are collected by the state over time.
Thus, the bulk of the winnings are only taxed when the winnings exit the envelope. And again, life insurance offers a tax benefit. When the life insurance contract is more than 8 years old, the saver can make withdrawals and benefit from a deduction of 4600 euros on taxable capital gains. This allowance is doubled for a married or civil partnership couple (9,200 euros).
Life insurance remains the benchmark product for developing financial wealth
Les épargnants français détiennent près de 50 millions de contrats d’assurance vie. Les encours investis sur ce placement représentent plus de 1750 milliards d’euro. Et les trois quarts des encours sont investis en fonds euro. Ces placements sans risque (le capital en fonds euro est garanti par l’assureur) délivrent des performances en baisse continuelle depuis plusieurs années. Leur performance pourrait passer sous la barre des 1 % d’ici quelques années. La faute au contexte économique : le taux des placements sans risque est proche de zéro. Face à cette situation, les épargnants semblent se détourner de l’assurance vie. Les versements sont en baisse ces derniers mois.
Poorly informed savers confuse life insurance with euro funds.However, alongside these euro funds, savers also have access to units of account, the performance of which has also been very good in recent years.Thus, many equity funds have delivered performances of nearly 10 % over the last 10 years.That is, the average performance of global equity markets.On the real estate support side, real estate investment companies are very popular.These companies deliver average returns of around 4.5 %.Not to mention that with the rise in the price of land, the value of shares in its companies is regularly revised upwards.
Thus, life insurance makes it possible to diversify its assets on different media delivering very interesting performance. As discussed above, savers can reinvest the earnings without tax friction. It is one of the few devices that combine these advantages.
The stock savings plan (PEA) and the retirement savings plan (PER) are two alternative funding envelopes to life insurance. But they are more restrictive. The PEA is reserved for investments in shares (shares or funds in shares of European companies). The investor will not be able to choose between risky investments and risk-free investments. This is very damaging because the possibility of being able to adjust one's allocation and exposure to risk is essential as part of a wealth strategy that adapts to the financial objectives of an investor.
Concerning the PER, this envelope allows, like life insurance, to modulate its allocation between investments without risk of capital loss (euro funds) and more dynamic investments (in unit-linked), and also benefits specific tax advantages.But PER will not be suitable for everyone.This is a tunnel product.Because apart from certain specific cases, the money is blocked until retirement.In a world where professional life is less and less linear, and where you sometimes want to tap into your assets to finance a project before retirement (a world tour, a second home, a sailboat, a beautiful car, etc.), the PER appears to be a relatively restrictive device compared to life insurance.
In conclusion, life insurance offers 3 strong advantages : a diversified allocation to obtain a good return, tax advantages, immediate availability of assets. In this sense, it is still an essential investment today.