When discussing savings in France, one investment vehicle consistently stands out: life insurance (“assurance vie”).
For many years now, it has been the preferred investment of the French. Yet it is sometimes misunderstood. Some still believe it is solely a product linked to death. In reality, life insurance is above all a flexible savings and wealth management tool.
At IFO Global, we regularly observe that life insurance contracts are present in many portfolios, yet they are not always optimized or aligned with the investor’s real objectives. And that is precisely the key point: our clients’ goals and motivations.
In this article, we clarify three essential aspects:
In practical terms, life insurance is a contract subscribed with an insurance company.
The policyholder makes contributions, either one-off or scheduled, and the amounts are invested across various investment vehicles.
Contrary to common belief, funds are not locked in. Withdrawals — known as “redemptions” — can be made at any time. These may be partial or total.
However, the tax framework becomes more advantageous after the eighth year, which is referred to as the fiscal maturity of the contract. For this reason, life insurance is generally considered a medium- to long-term wealth planning tool.
Life insurance can serve multiple objectives:
Few solutions combine such flexibility, investment diversification and tax efficiency.
It is important to understand that life insurance is not a single investment.
It is a wrapper within which funds can be allocated across different vehicles. At IFO Global, particular attention is paid to the quality, diversification and allocation of these investment vehicles.
The euro fund is the secure component of the contract. It corresponds to the insurer’s general assets backing the policy.
This vehicle is primarily invested in bonds.
It is particularly suitable for conservative profiles or short- to medium-term objectives. However, its return is generally moderate, which is why a broader allocation strategy is often required.
Unit-linked funds allow investment in financial markets:
Return potential is higher, but capital is not guaranteed. Value may rise or fall.
The allocation between secure funds and unit-linked vehicles must be determined based on:
A well-structured contract generally relies on a coherent balance between security and growth.
Growth funds represent an intermediate solution.
They provide a capital guarantee at a specified maturity date (for example after 8 or 10 years). During the investment period, the value may fluctuate, but the guarantee applies at maturity.
Their expected return generally sits between euro funds and unit-linked funds.
They can be relevant in certain wealth planning strategies when used appropriately.
Some contracts offer structured funds.
These vehicles rely on predefined mechanisms linked to the performance of indices or equities. They may offer attractive return prospects under certain market conditions, sometimes with partial capital protection.
However, they require careful analysis of their structure, payoff conditions and associated risks.
One of the major advantages of life insurance lies in its tax treatment.
In the event of a withdrawal, only the portion corresponding to the interest included in the withdrawn amount is taxable. The contributed capital itself is not taxed.
If €50,000 has been paid into a contract and it is now worth €60,000, total gains amount to €10,000.
In the case of a partial withdrawal, taxation applies only to the proportion of interest included in the amount withdrawn.
The age of the contract is a key factor.
After 8 years, an annual tax allowance applies to withdrawn gains:
For this reason, it is often advisable to open a life insurance contract as early as possible. This strategy is commonly referred to as “taking date,” especially relevant given that tax law changes are generally not retroactive.
Life insurance is also a powerful estate planning and wealth transfer tool.
For contributions made before age 70, each beneficiary — whether a family member or not — may receive up to €152,500 under a specific tax framework, separate from standard inheritance tax rules.
Drafting the beneficiary clause is strategic.
It must be tailored to:
An improperly drafted clause may limit the effectiveness of the arrangement. For this reason, careful structuring is essential.
Not all life insurance contracts are equal.
Several elements must be carefully reviewed:
These costs may vary significantly and impact long-term performance.
The range and quality of available funds, as well as management options (free management, advisory, discretionary), are decisive factors.
Older contracts are not always aligned with current market conditions or with the policyholder’s evolving objectives.
The key question is therefore not simply whether one holds a life insurance contract, but whether it is properly structured and aligned with one’s overall wealth strategy.
Life insurance remains a central instrument in wealth planning in France.
Its flexibility, investment diversification and favorable tax framework make it a particularly powerful tool — provided it is used in a coherent and personalized manner.
If you are questioning the relevance of your current contract or considering opening one, a comprehensive review often reveals significant opportunities for optimization.
At IFO Global, we support our clients in this process, ensuring that each life insurance strategy is aligned with their wealth objectives and investor profile.
