Pension or life insurance contract: what is the best choice?


Some life insurance contracts offer, as an option, photo credit guarantees: Shutterstock

Pension plans and life insurance contracts have different purposes. The former carry certain risks, while the latter are savings contracts with the aim of raising capital. Certain insurance contracts are also offered as an option by guarantees.

Summary:

  • A pension contract provides essential guarantees

  • Life insurance is mainly a savings contract

  • L’assurance-vie offers additional options …

  • Life insurance allows the policyholder to exercise their redemption right

  • Pension or life insurance contract: which one to choose?

A pension contract provides essential guarantees

In a context of health crisis, the issue of pensions arises with some acuity. In fact, pension plans provide guarantees that can be very useful in case of long illness, hospitalization or even death, for loved ones.

La prévoyance covers two main categories of risks:

  • The first are related to death, incapacity, disability and dependency. As such, they can permanently interrupt or suspend a professional activity for a relatively long time.

  • The second concerns the medical expenses generated by hospitalization, a consultation or analyzes related to it.

The pension plan thus complements the compulsory Social Security scheme and allows you to receive your full salary and pay for medical expenses in the event of illness. However, this is insurance in the strict sense, ie it only intervenes when a risk is realized. Contributions are paid out in the event of non-realization.

These guarantees are also indispensable, especially for family cooks. They not only compensate for the loss of income of the insured, but also make it possible to maintain a certain standard of living for the whole family. In more serious cases, such as death, the benefit corresponds to capital paid to the surviving spouse and / or to an education pension for school-age or school-age children.

Taking out an individual pension plan means not benefiting from a group pension agreement

Before entering into an individual pension plan, it is important to check that you are not already a beneficiary of a group pension agreement taken out by your employer. In principle, optional (except for executives), the establishment of a collective bargaining agreement for all employees may become an obligation for the employer when provided for by a collective agreement or a branch agreement. In the event of resignation or retirement, the employee is forced to enter into an individual pension contract.

Life insurance is mainly a savings contract

Contrary to many people’s beliefs, life insurance is a savings contract. It can be invested in two main categories of support, namely euro-guaranteed funds whose capital is guaranteed and units of account whose management is more dynamic (they can be invested in shares or real assets) with a capital that is not guaranteed. The life insurance contract is also a tax envelope. It allows, if the sums are placed long enough, to minimize capital gains tax.

L’assurance-vie offers additional options …

But that’s not all. Life insurance can also be used in the transfer of assets. In fact, it is possible to conceive an egg of the beneficiaries of his contract and the latter will automatically become the owner in case of death without the latter not being integrated in succession.

In addition, certain life insurance contracts include optional pension guarantees. The lifetime guarantee allows, for example, in exchange for additional contributions, to bear the costs related to death or to protect the spouse in the event of an unfavorable marital status (separation of property, for example).

Life insurance allows the policyholder to exercise their redemption right

Unlike a pension contract whose funds are permanently lost in the event of non-performance of the event, life insurance allows the policyholder to exercise, before the end of the contract, his right of redemption to meet a unexpected. The savings can then be paid in full or in part. In this second case, the contract is not broken and allows the policyholder and his beneficiaries to enjoy the tax benefits of life insurance.

Pension or life insurance contract: which one to choose?

It all depends on the individual situation of the writer. As pension plans are often collective agreements covered in whole or in part by the employer, they may be combined with a life insurance contract which will reduce the cost of inheritance in the event of death. It is then not necessary to take out additional options in the life insurance contract.

With regard to high equity, it may also be interesting to have two types of contracts, each with specific guarantees and possible options to better protect certain beneficiaries.

Finally, we must not forget the case of entrepreneurs. Taking out pension plans is essential to protect their loved ones, but also their production tool, this does not stop them from investing in a life insurance contract and looking at additional options that might be helpful.

Ultimately, it is not always necessary to arbitrate between these two types of contracts which may be complementary. On the other hand, the higher the income and the more complex the financial situation, the more useful it is to recover a wealth management board, which can then take stock of the needs of families.

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