For a better life and for our security, taking out life insurance remains a perennial option. Getting a life insurance is as easy as getting a candy bar these days, but how much do we really know about them. This article walks you through the basics of getting a life insurance and what the latter is. So, without further ado, let’s get into the thick of it.
Life insurance is an investment of funds materialized by a contract that guarantees a person’s life in return for premium payments. As the name implies, it is about preparing for the worst during a person’s survival or death and making your dreams and plans come true. Indeed, while you are alive, you want to build up more capital and finance a project or simply prepare for your retirement when you are no longer working. Thus, life insurance can be a kind of medium or long-term savings. In the case of a death contract, it is about guaranteeing the death of a person by transmitting the premium to the beneficiary designated by the subscriber. It is thus to accompany the future of your children or your grandchildren in the absence of the insured.
The basics of life insurance
The principle of operation of the life insurance is carried out initially by the adhesion with a group of insurance or, more precisely, with financial institutions. The membership is not free and is materialized by a contract signed between the two parties. From this contract, the insured makes a payment on a regular basis or not for at least 8 months. That is to say; you choose between the free payment and the programmed payment. Then, like any other savings, an interest rate is added each year to the sums paid in, and the subscriber can withdraw his money at any time.
Types of life insurance contracts
1. The single-support contract
With a single investment medium, including dollar funds, the single-support contract is intended for people who want to enjoy total security. Thanks to this investment of funds, the remuneration of the investors will be guaranteed with a minimum rate of saving. But this rate is sometimes considered very low, ranging from 3% to 6% on average.
2. The multi-support contract
On the other hand, the multi-support contract is equipped with several supports, including the fund in euros and the units of account such as bonds, funds invested in real estate. Faced with the lines of supports proposed by the insurer, the investors can place their capital in risky supports and secured funds. On the one hand, this allows to ensure a sum of money and, on the other hand, to constitute a possible significant return, but with more risks. Indeed, depending on the financial market situation, your capital can be profitable or lose its value.
The advantages of life insurance
Very popular with households, life insurance offers multiple advantages. First, it is a way to save an income at your convenience. Thanks to the interest rate, you can gradually boost your investment to build up a large sum.
The life insurance contract is very flexible. Indeed, your capital will be available at any time. In case of need, you just have to make a redemption request. Then, there are several ways to unwind a contract. For example, if you want to recover your capital in one go or if you wish to receive it regularly by transforming it into an annuity. Among other things, in the event of death, the money can easily be transferred to the beneficiary named by the deceased.
Apart from the pension, it also allows you to supplement your income. In addition, your investment is subject to a specific and very advantageous tax system. Indeed, only the interest will be taxed. Thus, the capital granted is tax-free when you make a redemption request. Moreover, the tax rate is degressive according to the duration of the contract. It also depends on the premium payment period.
Moreover, an annual allowance will be applied to the deducted interests. In addition, in the event of death, the beneficiary will be totally exempted from the tax levied. At the same time, the other beneficiaries have an allowance provided. Finally, the transmission is carried out outside the estate. That is to say that the sums granted to the beneficiary will not be shared between the heirs of the deceased.
Sound off in the comments section below and tell us if you want to read more about life insurance.