Life insurance: debunking some preconceived ideas
Your short-, middle- and long-term projects may include buying real estate, financing your children's education, preparing for retirement or passing on your estate in the event of your death... Given the challenges of modern asset management, life insurance is the smart savings solution for today's sophisticated investors, but not only, as there are still many misconceptions surrounding this investment that need to be debunked.
Let's take a look at the myths and facts surrounding this investment product, which is winning over more and more savers. Whether you're a seasoned investor or just starting out, you can choose a life insurance policy to suit your objectives and savings capacity.
In this article, we'll focus more on life insurance for investment and saving purposes than on life insurance for provident purposes.
Life insurance is only useful in the event of death ❌
There are two different types of investment when it comes to life insurance:
- Provident savings policy: This type of insurance is primarily designed to protect your loved ones in the event of death. Traditionally, the contributions paid in do not allow access to capital, as they are used to build up a sum of money that your beneficiaries will receive after your death. However, there are a number of provident savings policies which, under certain conditions, allow you to recover a capital sum during your lifetime.
- A life savings and investment policy, the main subject of our article: This type of life insurance works like a savings product. You can invest money in it, which you can withdraw at a later date to finance projects, prepare for retirement, or pass on capital to your loved ones in the event of your death.
In short, life insurance is a solution that allows you to:
💰 Save money to finance projects
👨👩👧 Prepare for your child's future
👩🦳 Top up your retirement pension
⌛ Anticipate and prepare your estate
☂️ Protect your loved ones in the event of death
Life insurance is only for the wealthy ❌
Many people think that life insurance is reserved for the wealthy. Although the minimum amount to open a policy can be high, there are accessible options that allow you to diversify your savings with a reasonable investment.
At AXA, for example, we offer:
- MySmartPension (Pension Savings Plan) to prepare for retirement, available from as little as €50 a month.
- Borea (Savings and investment) for those who want to save while benefiting from the security of a guaranteed rate for 8 years, coupled with high-performance funds. Available from €2500.
Life insurance offers attractive tax relief ✅
First of all, with the exception of retirement savings, there are no taxes on your savings at the end of the policy or in the event of death, nor in the event of partial or total withdrawal before the final date initially planned.
Secondly, you are eligible for a tax reduction from the moment you save.
In fact, each taxpayer can deduct:
- Up to €672/year from their taxable amount relating to the premiums paid for a life insurance contract (see Article 111 of the Luxembourg income tax code (L.I.R.)),
- And up to €3200/year for the premiums paid on a pension savings contract (see Article 111 bis of the L.I.R.).
My capital is blocked, inaccessible and life insurance lacks flexibility ❌
Contrary to popular belief, your capital is not locked in a Luxembourg life insurance policy. You are free to dispose of your savings as you see fit with:
- Partial or total surrenders possible at any time
- A great deal of flexibility when it comes to managing your investments
- The possibility of adjusting your investment strategy as your needs change
Life insurance does not offer access to the financial markets❌
Our life insurance for investment products offers the possibility of investing your money in two ways, depending on your risk aversion and return requirements:
Guaranteed rate: You can choose to invest your money in investment vehicles with a fixed, secure return.
Unit-linked policies: If you're prepared to take a little more risk for potentially higher returns, you can invest in unit-linked policies. This gives you access to funds that can vary according to the performance of the financial markets, and comes with the flexibility to choose the investment strategy that best suits your objectives and risk tolerance.
Life insurance is only available to Luxembourg residents ❌
Luxembourg is home to some 230,000 cross-border workers, representing almost half of the total workforce. These are potential savers who may wish to benefit from the advantages of a Luxembourg life insurance policy. Some policies, such as pension savings, are available to non-residents, and can also reduce your tax bill.
By taking out a life insurance policy in Luxembourg, you'll benefit from an ecosystem that places the protection of your savings at the heart of its concerns (security triangle, super privilege).
Life insurance is an ideal tool for passing on your estate ✅
When it comes to passing on your assets, life insurance is a flexible product, allowing you to freely designate beneficiaries and modify them as you see fit.
Life insurance is much more than a simple financial investment: it is an overall wealth management tool in its own right. Beyond preconceived ideas, it offers a secure, flexible and tax-efficient framework for demanding investors. Against a backdrop of economic uncertainty, it is the smart choice when it comes to protecting and getting the most out of your assets in the long term, while retaining a high degree of flexibility depending on the savings product you choose.
With our BOREA life insurance policy, available from €2500, discover a new way of saving with a guaranteed NET yield of 1.75% for 8 years.
A policy that entitles you to:
🤑 Attractive returns
- A guaranteed NET rate
- 10% of your savings invested in Unit-Linked policies
📈 Define your guaranteed capital in advance
🔐 Secure your savings
💰 Get free access to your savings whenever you need them
💵 Make additional payments
🔎 Full transparency in terms of management fees
💸 Exemption from all exit taxes
