Life insurance is a contract by which the insurer undertakes, against payment of premiums by the subscriber, to pay capital to a specific person (the beneficiary) in the event of the death of the ‘assured. In some countries, life insurance is also used as an investment vehicle. Your savings remain available at all times. To recover it, you will have to make what is called in the jargon of the insurers a “buy-back.”
However, please note that the latter will be subject to specific taxation depending on the dates of opening and payments on your life insurance contract, as well as the total amount you have in life insurance. The transmission to beneficiaries remains possible in the event of the insured’s death, with tax advantages to the key.
Life Insurance Beneficiary Clause
You may be wondering what the beneficiary clause of life insurance is for and especially how to write the beneficiary clause of life insurance? You should note that this beneficiary clause must be drawn up when the contract is taken out. It is the beneficiary who will inherit the sums held on the agreement upon the death of the insured.
It can be one or more people. Above all, it will not necessarily be an heir in the legal sense of the term (spouse, child, grandchildren, etc.). The beneficiary clause can make it possible to transmit the savings held on his life insurance contract to a person with whom you have no family tie and an association, a foundation, etc.
However, please note that the sums thus transmitted must not be too large in relation to the rest of the estate. If this were the case, the heirs who had been wronged could take legal action.
Finally, the beneficiary clause of a life insurance policy may be subject to dismemberment. This means that you can separate bare ownership and usufruct in order to optimize the taxation of the transmission. For example, one could designate his spouse as the usufructuary beneficiary and his child as a bare owner. Thus, inheritance costs will be lower.
How to Open a Life Insurance Cover
Here are simple steps you should follow if you plan to open life insurance.
Choose the Subscription Method and the Beneficiary
The insured has the choice between an individual subscription or a joint subscription. When opening this contract, it would be best if you also define the beneficiary clause.
Choose the Amount to Be Paid and the Frequency
The insured can opt for:
- a down payment, and that’s it;
- an initial payment and regular payments;
- an initial payment and one-off payments.
Choose Investment Vehicles
The insured can choose which pocket to favor or opt for a balanced allocation between an investment with guaranteed capital but low income and riskier and potentially more profitable units of account.
Choose Your Management Mode
The insured has the choice between three different types of management. Common types include:
- free management (arbitrations are carried out by you);
- recommended management (the management company offers you arbitrations that you are free to make or not);
- managed management (arbitrations are carried out by an authorized management company).
Throughout the life of his contract, the insured can make partial surrenders. That is to say, they will withdraw part of the capital placed on their life insurance. The insured person can also proceed with a total redemption. This means that they can recover the entire stake. Finally, on the death of the insured, all of the assets held on the life insurance contract are transferred to its beneficiaries.