Unlike certain investments such as the PEA, it is possible to combine several life insurance policies. But is it advantageous to take out several contracts? Why do you want to diversify your life insurance? Is having more than one really better? We answer all your questions about whether or not you have several life insurance policies. Counterparty risk, tax benefits, life insurance after age 70, multiple beneficiaries… We tell you all about this investment!
Summary
How does life insurance work?
Before thinking about having several life insurance policies, you should know how they work.
With life insurance, you accumulate capital (payments or acquired gains). In the event of a partial or total withdrawal, the capital comprises a fraction of the payments as well as a share of your earnings (interest and capital gain).
You do not owe any tax from the moment your savings remain invested in the life insurance policy. On the other hand, in the event of withdrawal, interest and capital gains are subject to tax. And in the case of a total redemption, all sums included beyond the payments are considered as a taxable gain.
On the other hand, gains from contracts over eight years old are automatically taxed on their entirety if the subscriber has chosen the flat-rate withholding tax. These taxes are then reported on the tax return.
Can we have an unlimited number of life insurance policies?
The law does not provide for any limit on the number of life insurance policies held by an investor. Unlike other savings books offering tax advantages, this investment is not limited in number.
On the other hand, the absence of limitation is accompanied by the absence of a ceiling on the sums that can be invested. These characteristics also make life insurance one of the best investments for building up wealth.
What is counterparty risk?
When you hold a life insurance contract in a bank or an insurance company, you have a claim against the establishment. It is he who owns the securities in which you have invested your money. In the event of bankruptcy, the organization would be unable to repay you the full amount invested. There is therefore a counterparty risk.
Although it exists, it is particularly low because insurance companies in France are subject to prudential regulations. However, it is quite possible that large companies will disappear overnight. This counterparty risk must therefore push you to have several life insurance contracts in order to limit damage.
Can we have several life insurances to multiply the tax advantages?
You should know that the advantageous taxation of life insurance applies to all contracts held, in their entirety. You will therefore not have additional tax advantages in the event of holding several contracts.
Indeed, the allowance for life insurance over eight years applies only once, on the sum of redemptions made in the year. Nevertheless, you can optimize taxation thanks to a trick. All you have to do is make withdrawals and payments from one life insurance policy to another to take advantage of the reduction each year. And this, even if you do not need to consume the redeemed capital.
You can optimize taxation in the event of redemption after eight years. Make redemptions on the contract resulting in the lightest taxation. With this in mind, it is advisable to combine several contracts (a fund contract in euros and another for CUs), one of which will be used to carry out the redemption.
Open a new life insurance policy after age 70
On the other hand, it should be known that life insurance can reduce inheritance tax. Premiums paid after age 70 are considered estate assets, but interest earned is not. The latter are totally exempt from inheritance tax. So it has appeal in terms of transmission.
Therefore, it is advisable to open a new life insurance after the age of 70. This also makes it possible to differentiate between the two inheritance regimes, in order to facilitate the procedures for the insurer and the tax authorities. These are then reasons of readability and simplification.
Should several life insurance policies be opened in the event of multiple beneficiaries?
With a life insurance contract, you have the possibility of designating several beneficiaries, provided that the beneficiary clause is well drafted. To ensure your succession, you are therefore not required to have several contracts.
However, having several life insurances makes it possible to maintain the confidentiality of the sums paid to each beneficiary. And when the time has come to recover the funds, each beneficiary will be able to receive their capital without waiting for all the others to have gathered all the supporting documents. This makes the process easier.
To be reimbursed the capital of a life insurance policy, the beneficiary must take the following steps:
- first, appoint the notary in charge of the succession;
- in the absence of a notary, the beneficiary must carry out the procedure alone. For this, he must provide the insurer or the bank with the death certificate of the insured, an identity document, proof of his title if he is designated only by his quality (deed of filiation , family book, marriage certificate, proof of will, etc.), a RIB/IBAN of an account in his name, the original copy of the life insurance contract (optional).
To note : you can open a life insurance contract per heir with different risk profiles depending on the beneficiary.
Designate a contract for each life project
You have several big projects: real estate project, studies of grandchildren, transmission of assets, preparation of additional income for retirement…
In this context, it may be useful to take out a life insurance contract by objective with a risk profile adapted to each person.
How to know the amount of life insurance?
In the case of multiple life policies, you may encounter difficulties in monitoring the outstanding amount of each investment. This term refers to the capital and interest of life insurance. To find out the amount of each contract, simply contact your insurer or bank advisor.
This professional will draw up a precise inventory of your financial situation. If you have invested in a euro fund, this operation will only be a formality. On the other hand, in the case of multi-support, the insurer or the banker will tell you your latent capital gain or your latent loss.
In any case, whether you take out a single life insurance policy or several, do so only with a competent person. If you need help explaining how life insurance works and all the intricacies you need to know, you can turn to an insurance adjuster, broker or asset manager.
