Life insurance guide

With assets of almost EUR 1.8 billion, life insurance is the most popular investment option⁽¹⁾ in France, as it's flexible and adaptable.

You can use it to save for a home, for your children's education or for your retirement. You can even use it to make a donation or transfer your assets. 

There are lots of types of life insurance, depending on your age, goals, risk appetite and how long you want to save for. You can choose between fixed or non-fixed payments.

Life insurance let's you choose the level of risk you're comfortable with to achieve your goals. For example, funds in euros are guaranteed risk-free, but don't offer high returns; while 'unit-linked' funds are based on how the financial markets perform, so they offer higher potential returns but you could lose your capital.

Importantly, life insurance policies currently have a favourable legal and tax status in France⁽²⁾. 

To sum it up, life insurance lets you save against a wide range of financial products to help you plan your inheritance under specific conditions.

Taking out a life insurance policy is a good way to put as much money aside as you can afford, especially if you've just started working. For example, you could put the capital you build up towards buying a home.

Choose from a wide range of products to invest based on your risk appetite. Get maximum security in euro funds, or search for higher returns by choosing transferrable securities UCI⁽³⁾.

Life insurance can help you build and grow capital over time. Under the right circumstances, it can be a good way to secure an additional income for when you retire.

Under some policies, you can donate your funds while keeping some control, by signing an additional pact or automatic deed. 

In return for the donation, you can: 

• ask that the donated sum is invested in a life insurance policy
• set the age when the person you donate to can access the funds
• require your agreement before any actions like redemption or arbitration can happen

This means you set the rules and will know exactly how the funds are used.

When you transfer your assets through a life insurance policy, there's a specific tax framework. The life insurance policy lets you transfer extra capital to support what you're already planning on leaving to your children, not including estate assets. 

If you make payments before you turn 70, you can transfer up to EUR 152,500 to each child beneficiary on your policy, totally tax-free⁽⁴⁾, excluding social security payments. 

This allowance is in addition to the direct allowance that's normally inherited by law, excluding life insurance.

The start date of your policy is essential as it allows the 'tax meter' to start, even if you don't have many savings right now. You then add to it with: 

• one-off manual payments
• scheduled payments you can change or stop at any time

You can also access the funds during the policy if you need to. You can make a one-off withdrawal, or set up scheduled withdrawals to access money more regularly.

Most life insurance policies offer a range of investment products: 

• a euro fund to keep your capital stable and secure. You can allocate all or part of your investment to a euro fund
• unit-linked investments to boost your savings. This option helps you build a personalised portfolio based on your profile, risk appetite and how long you want to invest for. It also offers security and long-term performance

Plus, if you set up scheduled payments for products exposed to UCIs⁽³⁾, you can smooth out the effect of market changes while focusing on long-term performance.

*Amounts invested on Future Euro Products, minus the entrance and management fees, are guaranteed at all times.

Unit-linked investments, subject to market changes, may go down as well as up and you may risk losing capital.

Within payments, you can change your investment options through arbitration. This has no impact on tax⁽²⁾.

Arbitration is usually limited each year.

If you pass away, your capital will be transferred to the beneficiaries you chose when you set up the policy. They could be:

• your spouse or civil (PACS) partner. In this case, the capital you received from your policy is exempt from tax when you pass away
• any other person, including relatives, close friends or legal entities, such as a charity or research institute

Usually, life insurance policies have a standard beneficiary clause you can change at any time⁽⁶⁾. It's very broad and designates spouses, children and heirs as the default beneficiaries. This means it can be used to resolve the majority of situations. You can also add any other clause, like designating one or more beneficiaries by name.

To add a personalised clause, get in touch with us or your notary. They'll ensure your will is clear, so it's easier to interpret when the time comes for your capital to be paid to your beneficiaries.

A specific tax framework⁽²⁾ applies to life insurance when: 

• capital is earned during total or partial redemption
• you pass away during the transfer of capital to your designated beneficiaries

You can get a life insurance policy at any age. However, the length of the policy matters more than the amount that's invested, so it might be best to take out a policy as soon as you start working. The earlier you start, the more you'll benefit from the taxation rules.

Life insurance is an investment you can use to support many goals: growing your savings, preparing for your retirement or transferring your assets. Plus, the taxation on life insurance is better, both during the policy's term and for gifts or an inheritance.

Life insurance sold by insurance companies, banks or mutual insurance companies. You can usually take out a policy online.

Then, you can fund your policy how you want, with manual or scheduled payments. You can change or stop your payments whenever you want, and it'll have no impact on you or your policy.

The return on a life insurance policy depends on how much is invested, and on your payment choices, like capital-guaranteed products with a euro fund or unit-linked investments.

The fees applicable on your policy can also affect the performance. These will be in your contract documents.

In 2020, the average net rate paid on euro funds for life insurance policies was 1.3%, compared to 1.46% in 2019, according to the French Insurance Federation (FFA).

Calculating the average performance of all units of account (UC) doesn't make much sense, since there are CUs invested in all asset classes (equities, bonds, real estate etc.) and all over the world. To estimate an average return on a unit-linked investment, it's best to look at how markets perform when this type of UC is presented.

**For contracts marketed by HSBC Continental Europe, amounts invested in Future Euro Products, minus the entry and management fees, are guaranteed at all times.