How to terminate a life insurance to get your money back?


(Photo credit: Unsplash – Bruce Mars)

Despite a confusing name, life insurance is a savings product. In this sense, talking about “termination” is not really the exact term because termination concerns insurance contracts called P&C, for fire, accidents and various risks. Rest assured, however, it is possible to close your life insurance policy or even withdraw money if needed, without closing it. Explanations.

A first reminder: the sums invested in a bare life insurance contract are not blocked. The eight-year period, which savers often hear about, is not a period of blocking your funds. You just have to wait for this whole period and you want to benefit from the most fiscally advantageous withdrawal conditions but if you want or need to get your money back before this eight year date, this is quite possible. Similarly, after eight years, you have no obligation to close your contract to open another.

When can I close my life insurance policy?

A life insurance contract is a savings product and has nothing comparable to a classic insurance, that you can sign up to live or in the car. If you want to get your money back, i.e. the amounts placed on the contract, you are going to make a redemption, whether it is total or partial. So we are not talking about “termination” but redemption. Note: the “total redemption” procedure, which is equivalent to withdrawing all the sums invested in the contract, will cause the termination of the life insurance contract.

Total redemption is possible at any time during the life of the contract, it is not necessary to wait for the anniversary date.

How can I close my life insurance?

All you have to do is send a registered letter with acknowledgment of receipt (LRAR) with a number of information and supporting documents.

Once your courier is received, the insurer has two months to send you funds in more practice, which term is more often includes between 10 and 15 days. If you have written your contract with an online bank, it is most of the time possible to do this completely online.

Sample letter of redemption / termination of a life insurance contract

As mentioned in the previous paragraph, many partial or total redemption procedures of the insurance contract are now done directly online through a form. But, nevertheless, the banking establishment still asks you for a letter (or even a registered letter), here is a model life insurance redemption letter that you can use.

Ma’am, sir

I hold a life insurance contract (contract name) No. (contract reference) taken out with your company on (date).

I wish to make a total (or partial) redemption of this contract.

I hereby request you to pay me the sum of (…) euro, in accordance with Article L. 132-21 of the Insurance Code, within two months of receipt of this letter.

Please accept, Madam, Sir, the assurances of my highest consideration.

(Signature)

How is my life insurance policy paid?

It all depends on the choice of arrival, which you made at the time of the contract. If you have opted for an outflow of capital, you recover the integrity of the sum paid on a contract at once, less les frais and less time.

If you have opted for a rental, you reach your monthly payments based on age and capital accumulated on the life insurance contract.

The cases in which a redemption without taxation is possible

In certain cases of force majeure, the redemption of your insurance contract may be totally exempt, and includes capitalized interest:

– Economic license

– early retirement

– Judicial liquidation of the company (for a contractor)

– Accident / illness resulting in a 2nd or 3rd category disability.

What if I need money but don’t want to close my life insurance policy?

In the event of a need for cash, you can only withdraw part of the amounts paid on your life insurance policy. We then speak of a “partial redemption.” The advantage is that this transaction does not result in the termination of the contract, it allows new payments to be made in the future and it does not call into question the tax precedence of the contract. In other words, if your life insurance policy was taken out seven years ago, a bare partial redemption is not going to have an impact on how long you have to wait to benefit from the terms of redemption the most fiscally advantageous. For a partial redemption, you will have to define the amount and the supports (funds in euros, units of account, other) chosen. This operation can be performed several times.

If this need for cash is not that temporary, you can also get an advance in the form of a loan in fine.

Conclusion: we are not talking about the termination of a life insurance contract but a total or partial redemption. This redemption is possible at any time in the life of the contract in order to recover your money but it is after eight years of detention that it is most tax advantageous. The demarcation is done by registered letter or on the line and in your establishment allows you. The insurer has two months to return your funds.

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