Life insurance contract: operation

Verified 01 January 2023 - Directorate for Legal and Administrative Information (Prime Minister)

By signing a life insurance contract, you agree to make periodic contributions to build up your savings. The insurer needs to grow your money in order to pay a principal or annuity to the beneficiary the contract (you or another person). The method of calculating interest varies according to the medium used to make savings grow: euros, units of account or multi-media. In case of need, you can withdraw money before the end of the contract.

Since 1er june 2022, banks, insurance companies and financial institutions that market life insurance contracts must post management fees on their website. The presentation should be in the form of a standard table that groups the fees by category.

If you have a life insurance policy, you you are obliged to pay the contributions, which are also called bonuses.

You can pay the premiums in 3 ways.

Fixed periodic premiums

The amount and frequency of contributions shall be fixed in the contract.

In case of non-payment of premiums within 10 days of the due date, the insurer sends you a registered letter with AR: titleContent.

If you do not pay within 40 days of sending this letter, the insurer may:

  • or terminate the contract in the absence or insufficiency of surrender value,
  • or to maintain the contract with reduced guarantees. However, this option is only possible after 2 years of premium payments or if you have already paid at least 15% of the premiums.

Free-payment premiums

You make payments based on your savings capabilities.

The contract shall set a minimum amount for the premiums paid.

Single premium

Only one payment is made when the contract is signed.

The insurance company may charge you a fee at the time of enrollment and during the life of the contract.

These costs are deducted from the value of the funds invested in the contract.

There are 4 types of fees:

  • File Fees. These fees are fixed and paid at the time of subscription.
  • Entrance fee. These fees are charged at each payment you make on the contract, at subscription and during the contract. They shall be fixed or proportional to the amount of the payment.
  • Management costs. These fees are levied throughout the duration of the contract.
  • Arbitration costs. These fees are levied on the amount of money transferred from a unit of account to the other. They are lump sum or proportional to the amounts transferred.

The pay rate depends on the contract you choose: Euro contract, Unit of Account contract, or Multi-Media contract.

Contract in euro

The funds you pay remain valued in euros in the contract, as in a bank savings account.

These funds are guaranteed, meaning that you cannot incur losses.

The insurer adds to your contributions the interest provided by the contract.

Contract in units of account

The funds you pay are not valued in euros in the contract, but in units of account.

They can take the form of shares, bonds, sharesUCITS: titleContent, shares of AIF open to professional investors, etc.

The value of the funds invested varies according to the evolution of the stock or real estate markets.

The funds are therefore not guaranteed, only the number of units of account is guaranteed.

The life-generation contract is a contract in specific units of account. At least 33% of the capital must be invested in sectors deemed particularly useful for the development of the economy (small and medium-sized companies, social and solidarity economy, etc.).

Multi-media contract

It comprises both euro-denominated and euro-denominated investments units of account.

Special case of the Euro-growth contract

The euro-growth contract can be a single-holder contract (the euro-growth fund alone) or a multi-holder contract (the euro-growth fund coexists with a euro fund and units of account).

The capital invested is guaranteed after a minimum of 8 years of holding.

The capital may be expressed in euro and in shares in diversification provisions, or only in shares of diversification provisions during the term of the contract.

If you need to withdraw the capital accumulated before the end of the contract, you can ask the insurer for a redemption or an advance.

The contract shall determine the surrender value.

The insurer keeps you informed annually.

Redemption

The redemption is a withdrawal of the savings accumulated on the insurance contract. It may be partial or total.

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Partial redemption

Partial redemption is the withdrawal of part of the savings.

In the case of a partial redemption request, part of the amount due is paid to you, the other part remaining invested in the contract.

You must make the request in writing to the insurance company.

A document template is available: 

Request the redemption of your life insurance contract

Total redemption

The total redemption is the withdrawal of all savings.

In the case of a total redemption request, the full amount of the contract is paid to you.

This redemption results in the termination of the contract.

You must make the request in writing to the insurance company.

A document template is available: 

Request the redemption of your life insurance contract

Advance

The advance is a loan that the insurer gives you without you touching the money saved on your life insurance.

You have to pay interest to the insurer at the rate set out in the contract.

You must make the request in writing to the insurance company.

A document template is available: 

Request information to get an advance on your life insurance contract

Terms of redemption

If the beneficiary of the contract has been informed of its designation, and has accepted it, this has an impact on the subscriber's redemption possibilities.

The rules vary depending on the date and form of the acceptance.

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Contract accepted after 18 December 2007

There are 2 possibilities:

Contract accepted before 18 December 2007

There are 2 possibilities:

  • If, at the time of conclusion of the contract, you have signed a waiver of your right to repurchase, you can no longer make a repurchase without the agreement of the beneficiary.
  • If you have not waived your redemption right, you can make redemptions of your contract without the agreement of the beneficiary.

Warning  

although most life-and-death contracts can be redeemed, you should verify that the contract does provide for this option.

Redemption Payment Unit

The redemption is subject to a cash payment, unless you opt for the delivery of securities or shares negotiable on a regulated market.

This option may also be exercised by the subscriber and the beneficiary of the contract.

You can also opt for the delivery of non-marketable shares in a regulated market and shares or shares of alternative investment fund. This option is irrevocable and must be done with the agreement of the insurer,

FYI  

the irrevocable option also applies to your beneficiary, unless you have expressly stated otherwise in the contract.

Income from a life insurance contract has different tax regimes, depending on the duration of the contract and the period of payment.

The life insurance contract may terminate before maturity, in the case of termination for non-payment (fixed periodic premium contracts), in the case of total redemption or in the case of transfer.

Except in such cases, the contract shall terminate on the scheduled due date, if the insured is alive at that time, or on the date of his death.

In the latter case, the capital shall be paid to the beneficiary of the contract.

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Insured person living at the end of the contract

The insurer pays you, on the date specified in the contract, a principal or rent.

Death of the insured person

The Death of the insured entails the payment of capital or rent to beneficiary designated.

If the principal is not paid out quickly, the contract continues to yield interest.

Please note

when a loved one has died, you can request to be informed of the existence of a possible life insurance contract taken out for your benefit.

Transfer

Transfer to another contract

You can transfer the savings of your life insurance contract in euros to a unit-linked contract or to a multi-carrier fund (euro-growth), while maintaining the seniority of the contract.

But the new contract must be signed with the same insurance company.

If, in the six months preceding the transfer of the contract, part of the savings has been converted into units of account, this part will not benefit from the retention of seniority.

Transfer to a retirement savings plan

You can transfer your life insurance policy savings to a retirement savings plan individual. This transfer terminates the contract.

Who can help me?

Find who can answer your questions in your region

  • For information

    Info Service Savings Bank Insurance

  • For information

    Intermediary or investment / financing advisor

  • To find out about the existence of a life insurance contract taken out for your benefit

    Insurance Risk Information Management Association (Agira)

    Organizes the search for unclaimed life insurance contracts in the event of the death of the policyholder.

    By mail

    1 Jules Lefebvre Street

    75431 Paris Cedex 09