Life and death insurance: how to distinguish them?
Verified 28 June 2022 - Directorate for Legal and Administrative Information (Prime Minister)
Despite the similarity of their names, life insurance and death insurance have many differences. They mainly concern the nature of the contract, the origin of the sum paid and the identity of the beneficiary.
Life insurance | Death Insurance | |
|---|---|---|
Nature of the contract | Life insurance is a savings product. It's a contract where you pay premiums to an insurer to pay you or your beneficiaries an amount on a date specified in the contract. | Death insurance is an insurance contract. You pay premiums to an insurer who agrees to pay principal to your beneficiaries at the time of your death. |
Amount paid to the beneficiary | The amount paid to the beneficiary is the savings set aside. | The amount paid to the beneficiary is the premium provided for when the contract was signed. |
Identity of the beneficiary | The subscriber may be the beneficiary. | The subscriber cannot be the beneficiary. The beneficiary is necessarily another person, family member or not. |
Taxation | Income from a life insurance contract has different tax regimes, depending on the duration of the contract and the period of payment. | Inheritance tax Death capital is not subject to inheritance tax. But if contributions have been made after the 70th birthday of the subscriber, they are reintegrated into the estate to be taxed with the rest of the estate of the deceased. Income tax The beneficiary is liable to income tax on the death capital, at the rate of 20% and after deduction of a €152,500. The taxable amount must not exceed the last annual contribution paid before the subscriber's 70th birthday. |