How to buy life insurance?

life insurance

Life insurance remains an attractive investment, it is one of the favorite savings schemes of the French. Before subscribing to a contract, the insurer must provide you with all the necessary information. Here are the things to know.

Information leaflet

All the general characteristics of the contract must be provided.No more question, as was sometimes the case not so long ago, of telling potential subscribers nonsense in order to extract their signature. Indeed, due to the proliferation of scandals, the duty of information to which companies are subject has become stricter from year to year. It has even been reinforced by an instruction of the Pacte law, which came into force in January 2020. Insurers must therefore provide their customers with a notice listing the guarantees provided for by the contract, the cases of exclusion and the obligations of the insured. Defined by the insurance code, a box appearing in the contract must also specify a certain number of information: nature of the contract, guarantees offered, existence of a right of redemption or transfer, costs and indemnities of any kind, duration of the contract recommended,

In addition, there is practical information concerning the course of the contract on a daily basis: possibilities for paying premiums and withdrawing money, procedure for handling disputes… That’s not all, the insurer must inform the insured on the situation of his savings: surrender value, amount of guaranteed capital… In short, he is also required to provide his client with a serious after-sales service.

Newsletter Membership

Supports, chosen management option, beneficiary clause, nothing should be missing. Once the insured has been made aware of the operation of the contract, he must sign a membership (or subscription) form specifying the specifics of his commitment and that of the insurer.

In other words, after the general conditions, common to almost all subscribers, we go to the next step: the special conditions, which personalize the contract. This bulletin contains information relating to the marital status of the subscriber and the insured (generally one and the same person), the date of conclusion of the contract and its duration.

Nothing should be forgotten: methods of payment of contributions, free or scheduled withdrawals, amount of the initial payment, list of media on which the capital is invested (with weighting of their respective weight), chosen management option, without forgetting the most important , namely the beneficiary clause. It should be noted that, due to secrecy, the insured may prefer that the identity of the beneficiary of the contract in the event of death be recorded in a will deposited with his notary.

Attention: experience proves it, an incomplete subscription form or one that is not filled in correctly can later lead to conflicts likely to end with the judge.

Life insurance: subscriber, beneficiaries… how does your contract work?

The subscriber who changes his mind has 30 days to withdraw. The contract does not correspond to the needs of the insured? The law offers him a period of 30 days to renounce it and thus recover his bet (within 30 days too, and without charge). All you have to do is send a letter to the insurer (no proof to provide) or use the model necessarily given to the subscription. Note that the 30-day period runs from receipt of all contractual documents.

Surrender value

The insured must be aware of the impact of the fees and taxes levied. This essential element of life insurance is the amount returned to the subscriber when he withdraws money. The insurer is required to communicate to him each year (every quarter, since 2020, for funds at risk), the surrender value of his contract, until the eighth year. Concretely, the surrender value is made up of the premiums paid (punctually or regularly) to which are added the interests generated by the capital invested. It is reduced by the fees deducted by the insurer (payment fees and annual management fees), as well as the amount of social security contributions (on funds in euros , they are deducted each year).

In fact, the calculation of redemption values ​​depends on the financial supports in which the savings are invested. No problem if it is funds in euros, since the capital account is fully guaranteed. On the other hand, if it concerns media invested in the stock market or in real estate, therefore units of account , which can vary significantly upwards or downwards from one year to another, the company cannot commit to a redemption value expressed in euros, but only in number of units of account.

Duty to advise

The law obliges the insurer to alert the client to the risks incurred. When taking out a contract, the insurer has a duty to advise. He is the market specialist, not the insured. He must therefore find out about the client’s financial situation, his objectives and his skills in this area, all of which is generally done in the form of a questionnaire to be completed by the client, then written investment advice.

Purpose of all these precautions: to check that the future insured has the material and intellectual means to embark on a sometimes complex and risky savings operation. The customer may sometimes refuse to complete the proposed questionnaire, in particular if he considers that certain details about his family situation (married, single, etc.), professional (sector of activity, salaried or self-employed, etc.) or financial situation (level of income, amount financial assets, owner or tenant of their main residence, etc.) do not have to be disclosed. It is then up to the insurer to warn him of the risks he is taking and to have him sign a waiver of liability.

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Compulsory only if death cover has been taken out. Caution requires, any risk must be accurately assessed by the insurer covering it. This is particularly the case for contracts that also cover the risk of death (additional capital is then paid). This assessment is carried out via a medical questionnaire attached to the membership form. This questionnaire must be clear and detailed, while respecting the privacy of the person concerned. Thus, no questions relating to genetic tests and their results are allowed. If the questions are not indiscreet, the client must nevertheless answer them honestly (illnesses, operations, etc.). Inaccurate declarations can indeed be sanctioned, at least if they are manifestly intentional, in which case the contract is generally cancelled.

The trick of periodic premium contracts

If the “free” payment contracts are in the majority, the companies still market so-called “periodic” or “scheduled” premium formulas. You have to be wary of this, because the subscriber is then obliged to make regular payments (every month or every quarter), for the entire duration provided for in the contract (at least eight years). Admittedly, the bet required each time is sometimes only 50 or 100 euros, but in the event of non-payment, the sanction is heavy: the contract is put in “reduction”, that is to say that its yield is reduced, for example by 0.30 points.

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