Having a life insurance policy is right. But holding several is even better. Explanation in six points.
- 1- You optimize the performance
The disparity in management, distribution and referencing policies of insurance companies goes hand in hand with the heterogeneity of the performances of their financial support. For example, the average yield of funds in euros fell to 1.8% in 2016, according to the estimate of the French Federation of Insurance (FFA), while some guaranteed funds still exceed 3% (Scrivener Opportunities, Security Pierre Euro.)
These performance differences are explained by changes in the financial composition of the funds. Some of the euro-denominated vehicles are composed mainly of real estate; others focus on corporate bonds or favor investment in shares. Taking out several contracts makes it possible to invest in several types of funds in euros and to hope for better overall performance.
Insurers do not all offer the same UCITS (or units of account, in life insurance) and some structures are not limited to house funds, opening their door to funds of external management companies. Some contracts are very well endowed with paper stone (SCPI, SCI, OPCI), others attribute a place of choice to the trackers, which make it possible to reproduce the performance of a stock index with little cost, even to a wide choice of live titles.
Finally, the management solutions available to you differ a lot from one contract to another. Free management with or without automatic arbitration, managed management, under the mandate, advised. But it is almost never possible to have multiple management modes for the same contract. As you can see, taking out different contracts gives you more flexibility in financial management.
- 2- You limit the risks
A second factor argues in favor of holding multiple life insurance contracts: the financial crisis! At the height of the tensions on the debt in the euro area in 2011, some insurance companies had been warned because of their strong presence in countries in difficulty, the famous PIIGS (Portugal, Ireland, Italy, Greece and Spain) , and a significant exposure to the stock markets, causing fear to the worst to their policyholders.
The situation has definitely calmed down, and the financial markets have recovered color, but the precautionary principle is still relevant. Having several life insurance policies in separate insurance companies will help protect your savings in the event of an institution experiencing difficulties.
Life insurance contracts benefit from the additional protection offered by the Life and Health Insurance Guarantee Fund (FGAP). If an insurance company is no longer able to meet its commitments, the fund is mobilized, guaranteeing sums placed up to 70,000 euros. The compensation paid is applicable by insured, subscriber or beneficiary of the contract, regardless of the number of contracts signed with the same company.
- 3- You assign a contract to each of your projects
Life insurance allows you to build savings that will be used to finance projects such as a real estate purchase, the financing of your children’s education or your retirement years.
By opening a contract by project, you can adjust the financial composition of each one to the investment horizon envisaged for each project and follow their evolution over time. Let’s take an example: you want to prepare the funding for your child’s graduate studies, now 10 years old.
You estimate the overall cost of the operation at 70,000 euros over five years (housing costs, registration …). By making projections with your advisor, you will be able to determine the number of regular payments to be put in place on this contract as well as the optimal asset allocation.
- 4- You reduce the cost of tax withdrawals
The funds available in a multi-asset life insurance contract achieve a wide variety of performances. The fund in euros is guaranteed in the capital and, thanks to the ratchet effect, the interest paid each year is definitively acquired. In return, its potential for performance is limited.
On the contrary, savings placed in units of account (in stock, bond, real estate, etc.) offer a higher potential for performance, but its capital is not guaranteed. Its evolution will, therefore, be linked, both upwards and downwards, to the evolution of the financial markets, and above all without any comparison with that of the fund in euros.
- 5- You transmit better by using multiple contracts
Life insurance has tremendous assets for passing on your wealth, even when you’re over 70. Because, in this case, only the share of payments exceeding 30,500 euros is subject to the standard scale of inheritance tax, gains, they are not taxed.
The method of calculating the taxation before and after 70 years is different; it is advisable not to mix the two compartments to limit the sources of error. After 70 years, choose to make your payments on a new contract. Attention, a partial withdrawal made on a contract open after 70 years will first amputate the gains made, while they would have been totally exempt from taxation without this operation.
- 6- You personalize the contracts according to their beneficiaries
In the logic of transmission, opening a life insurance policy for the benefit of each of your beneficiaries is a way to adjust financial management to their profile.
Depending on their age or the estimate of their future needs, the composition of the life contract may vary and be more or less oriented towards products not guaranteed in the capital but potentially more remunerative.
At the death of the insured, some insurance companies wait for the completeness of the file (photocopy of a piece of identity, the act of notoriety, bank account …) of each beneficiary of the same contract before preceding the settlement of capital. A trailing beneficiary may penalize all others.