Purchasing life insurance is entirely possible for policyholders. It should be remembered here that this investment formula differs from the others in that it remains the preferred medium- or long-term asset base for French savers. With a rather complex taxation, the subscription of a life insurance can also be envisaged in order to constitute an inheritance to buy a real estate. Overview.
How to proceed ?
We cannot mention it too much, it is a right under article L. 132-23 of the insurance code to buy back one’s life insurance, whether totally or partially. To do this, you must turn to your insurer by sending it by post a registered letter with acknowledgment of receipt including the latest statement of situation and a RIB (Bank identity statement). We invite you to study in particular the terms and conditions in more detail on the blog titled as simply as possible Life insurance redemption.
In theory and in practice, the insurance with which you have taken out the contract has a maximum of two months from receipt of the letter to make the payment to your account. Moreover, be aware that after the two-month period, the unpaid sums produce what is called interest at the legal rate, a bit like an unpaid invoice.
We invite you in the case of partial redemptions to make your own calculations for taxable interest. In reality, from the elements provided by the organization in charge of your life insurance, it is quite simple to apply this mathematical formula as your insurance advisor will certainly do:
From the Partial Surrender Amount, subtract the total payments made to date multiplied by the Partial Surrender Amount you have divided by the Total Surrender Value of the Policy on the Surrender Date. Either :
MRP – (TVDR x MRP) / VRTCDR
Where MRP: Partial redemption amount,
TVDR: Total payments on redemption date,
VRTCDR: Surrender value of the contract on the date of surrender.
The legal framework for the redemption of life insurance
When you took out your contract, the proposal made by your insurer had to indicate the surrender values during the first eight years at least. In addition, the costs deducted must be specified contractually and the savings acquired, if it proves to be equal to or greater than 2000 euros, makes it taxable for your insurance to specify the exact surrender value. This reality of the contracts leads many subscribers to terminate their savings beyond eight years.
Where sometimes the withdrawal becomes complicated, most often when for reasons of processing costs the insurance charges you operation costs that are too high in relation to the amount withdrawn, you have to think carefully. One of the tricks to avoid having these problems is also to proceed to arbitration.
If, as a good manager of your assets, you have carried out a real diversification and your savings are divided between different units of account (the fund in euros remains the least risky), a partial redemption will be made automatically in proportion to the value of the units of every investment. It is therefore a key element in your calculations.
Finally, there remains the question of the taxation of the sums collected. As such, we invite you to read or reread this article from Figaro showing the table of taxation relating to the period in which you are making your withdrawal. Note that on this subject, there are tax optimization solutions.