One of the favorite investments of the French, life insurance is a privileged contract for long-term savings, due to its more advantageous taxation beyond 8 years of ownership. Have you compared the offers and you realize that your life insurance contract no longer meets your expectations? It is possible to consider a life insurance transfer subject to certain conditions.
Can life insurance be transferred?
Prior to 2005, it was simply not possible to perform a life insurance transfer. If you were not satisfied with the terms of your contract, the only solution was to close it and open another contract. However, this had a tax impact, especially if your contract was recent. Let’s recall the rules in this area for a better understanding.
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Taxation of life insurance
Taxation of a life insurance surrender for payments before September 27, 2017.
|Contract age||Income tax and social security contributions||Flat rate levy and social levies|
|Under 4 years old||Income tax + 17.20%||35% + 17.20%|
|Between 4 and 8 years old||Income tax + 17.20%||15% + 17.20%|
|More than 8 years||Income tax + 17.20% after deduction of €4,600 for a single person (€9,200 for a couple)||7.5% + 17.20% after reduction of €4,600 for a single person (€9,200 for a couple)|
Taxation of a life insurance surrender for payments after September 27, 2017.
|Contract age||Share of payments < €150,000||Share of payments > €150,000|
|Under 4 years old||Income tax or PFU of 12.8% +17.20%||Income tax or PFU of 12.8% +17.20%|
|Between 4 and 8 years old||Income tax or PFU of 12.8% +17.20%||Income tax or PFU of 12.8% +17.20%|
|More than 8 years||Allowance then income tax or PFU of 7.5% +17.20%||Allowance then income tax or PFU of 12.8% +17.20%|
PFU = single flat-rate direct debit
This table clearly indicates that a premature exit generates higher fees. the life insurance transfer before 8 years by making a redemption is not advantageous from the point of view of the taxation of life insurance.
This is why the Fourgous amendment came to support life insurance policyholders wishing to transfer their contracts.
The Fourgous Amendment
It was Jean-Michel Fourgous, then a deputy, who decided in 2005 to offer a solution to subscribers to life insurance. Change your life insurance becomes possible, but not under any condition.
- Only the transformation of a mono-support contract into a multi-support contract is authorised. Clearly, if you had only invested your savings in funds in euros, this time you must also invest in units of account;
- 20% of your savings must be invested in units of account;
- You must transfer your life insurance contract to a contract with the same bank or with the same insurer.
Thanks to the Fourgous amendment, by respecting the conditions imposed, you do not lose the priority of your contract. This is indeed a transfer and not a closure, which does not generate any costs (taxes, special levies, etc.). On the other hand, by investing in units of account, the risk is higher, even if the proportion remains reasonable. However, this allows you to diversify your investments and hope for higher returns.
Life insurance transfer and Pacte law
Adopted on April 11, 2019, the Pacte law has broadened the possibilities in terms of life insurance transfer.
It allows policyholders to transfer their savings to another contract, whatever its nature. Clearly, the transfer of life insurance with the Pacte law softens the rules of the Fourgous amendment. Funds in euros or funds in units of account, you are free to choose your savings solution on your new contract.
On the other hand, the Pacte law still requires the subscriber to transfer their savings to multi-support or single-support life insurance in the same establishment (insurance company or banking establishment).
The life insurance contracts transferred within the framework of the Pacte law retain their anteriority, the money you have been able to save is transferred without total redemption or partial redemption costs.
Why transfer life insurance?
The reason is very simple : change your life insurance allows for significant savings. To fully understand the advantage of this transfer, let’s go back to the costs of this savings product.
- Entry fees: also called payment fees, they are applied each time money is paid into your life insurance. They are applied to the initial payment and additional payments during the contract;
- Management fees: these are the fees charged by insurers for the management of your contract. They will be higher for multi-support contracts and if you choose managed management. This management method allows you to delegate the management of your unit-linked contracts to an expert in order to choose the best support for your investment. For funds in euros or if you have knowledge of the financial markets, you can opt for free management imposing lower management fees;
- Arbitration fees: these fees are charged for each reallocation of your investments. In other words, you pay when you want to change the distribution of your savings by placing your money in new investment vehicles.
the life insurance transfer allows you to find a type of contract with lower fees. All the contracts taken out are not equal within the same establishment. In addition, all insurers do not have the same policy in terms of costs, some offer much more advantageous solutions, this is particularly the case with online insurers.
If it is possible to find a life insurance contract without arbitration fees or payment fees, be aware that all insurers impose management fees. However, these are generally charged between 0.50% and 1%, the difference is significant and impacts the amount of your savings.
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Compare life insurance to find the best deal
the life insurance transfer with the Pacte law remains limited. If it is possible to transfer your contract, you cannot change institutions. To optimize your savings, two solutions can then be considered:
- Change insurer: however, you cannot expect exemption from taxes and other social security contributions. Redemptions have a cost that must be estimated to know if it is really interesting to change life insurance;
- Make a comparison of offers from insurance companies before any subscription. You must preserve the savings invested by limiting costs as much as possible. Comparing the offers allows you to find the contract that best meets your requirements in terms of choice (several supports corresponding to your risk profile must be offered) and in terms of management fees, entry fees and arbitration. Comparing offers also allows you to find the best insurance in terms of performance.
Following your comparison, you can take out life insurance online. With Meilleurtaux Placement, subscription is simple:
- We identify your risk profile to ensure that we offer you investments suited to your financial situation and your objectives (preparing for your retirement, passing on assets, making your capital grow, etc.);
- You define the amount of your payments according to your financial possibilities;
- You select the contract options that suit you;
- You validate your subscription file.
Opening a new life insurance can be the ideal option if you cannot transfer your current contract. Indeed you will be able to benefit from a better life insurance contract for your savings while waiting for an expansion of transfer possibilities.
Indeed, it is often more relevant to take out new life insurance rather than continuing to supply bad life insurance (too charged with fees, for example). Especially since there is no limit to the number of life insurance you can have.
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Life Insurance Transfer Frequently Asked Questions
Why transfer your life insurance?
Transferring your life insurance contract to a new, more efficient contract allows you to benefit from reduced costs while maintaining the tax priority of your contract.
Is it possible to transfer life insurance?
Yes, since the Pacte Law it is possible to transfer life insurance. However, you are obliged to transfer within the same insurance company or banking institution.
Do we keep the seniority of life insurance after a transfer?
Yes, that’s the whole advantage of life insurance transfer, in addition to benefiting most of the time from better pricing. Example: if you take out a contract in 2014 and transfer it in 2022, you retain your 8 years of seniority for tax purposes.