Life insurance contract: operation

Verified 25 September 2026 - Public Service / (Prime Minister)

By taking out a life insurance policy, you pay bonuses which constitute remunerated savings. The insurer makes your money grow and agrees to pay a principal or annuity at beneficiary of the contract. The return on the contract varies depending on the financial risk you accept and the investment vehicles: units of account. Life insurance is a long-term investment, but if necessary, you can withdraw money before the end of the contract.

When you take out a life insurance policy, it is funded by your contributions, also known as bonuses.

There is no maximum limit for payments on a life insurance contract.

But the premiums paid on the contract should not be excessive in relation to your financial and family situation at the time of payment.

You can pay premiums in 3 ways:

Fixed periodic premiums

The amount of the premiums is fixed with the insurer at the signing of the contract. The premium may be annual, semi-annual, quarterly or monthly. Payments are then scheduled. The duration of the premium payment may be shorter than the duration of the contract.

In the event of non-payment of premiums within 10 days of the due date, the insurer will send you a registered letter with : titleContent. If you do not pay within 40 days of sending this letter, the insurer may:

  • or terminate the contract if its cash value is null or insufficient,
  • or maintain the contract with reduced guarantees. However, this option is only possible after 2 years of premium payments or if you have already paid at least 15% of the premiums.

Free-payment premiums

You make free payments based on your savings capacity. However, the contract may impose a minimum amount for each premium paid.

This type of contract is currently the most widespread.

Single premium

Only one payment is made when the contract is subscribed.

FYI  

Only premiums paid on certain contracts may be eligible for a tax reduction for the subscriber : these are the premiums paid to feed the life annuity contracts or disability savings contracts.

To set a date for a life insurance contract is to set the starting point for holding the contract. At the opening of the contract, a 1er payment marks the beginning of your savings investment.

There is no mandatory minimum amount for a first installment. Each insurer may freely set a minimum amount for the initial payment.

Depending on your contract, and depending on your savings capacity, you can then make other payments.

The duration of the contract (or the seniority), as well as the date of payment of the premiums, determines the taxation applicable to the transactions of redemption that you can do on your contract.

FYI  

On the information documents that you regularly receive from the insurer, you will find the effective date of your contract. This date allows you to calculate the seniority of your contract.

The insurer makes your money grow, which will be placed on different supports during the life of the contract: euro funds, units of account, euro-growth funds.

Some contracts offer only one investment medium: they are single-media contracts.

We are talking about multi-media contracts when different media coexist in the same contract. You can then choose the allocation you want to balance the risk of the investments.

Contract in euro funds

The amounts you pay remain valued in euros in the contract, as in a bank savings account.

The sums invested are invested by the insurer on low-risk assets. The value of the funds invested is guaranteed by the insurer.

Unit-linked contract

The sums you pay are not valued in euros in the contract, but in units of account.

The sums invested can be invested in particular in the form of shares,obligations, shares of SCPI: titleContent, shares ofOPCVM: titleContent, or FIA... The insurer must also offer you at least one certified unit of account SRI: titleContent, a unit of account labeled Greenfin (France green finance) and a joint and several unit of account. You remain free to invest or not on these supports.

The value of the funds invested varies according to the evolution of stock or real estate markets. Only the number of units of account is guaranteed by the insurer, but not their value.

The life-generation contract is a single support contract in specific units of account. At least 33% of the capital must be invested in sectors deemed particularly useful for the development of the French or European economy (small and medium-sized companies, social and solidarity-based economy, etc.).

Euro-growth fund contract

THEeuro-growth is a class of funds held in a life insurance contract. The capital may be expressed in euros and shares of diversification provisions.

The capital invested in this fund is guaranteed provided that it is held for at least 8 years. The proposed deadline may be longer.

Depending on the fund, the capital guarantee can be total (100% of the invested capital is guaranteed at the end of the holding period) or partial (the invested capital is guaranteed only up to 80% even at the end of the holding period).

As subscriber, you have the choice between 2 management modes for your life insurance policy: free management or managed management.

If you entrust the insurer with a management managed on your contract, it will offer you to choose an investment strategy according to the investor profile that suits you best: cautious, balanced or dynamic.

Free management

If your contract is under free management, you choose your own investments. The insurer does not have a management mandate for you.

At any time, you can request to switch to managed management.

Managed Management

You can entrust the insurer with the management of your contract, which includes units of account. Depending on your objectives and the investment period you have (savings, preparation for retirement, transfer of capital...)) the insurer will determine your investment profile.

There are 3 types of managed management:

Cautious profile

The prudent investor favors capital security.

The contract must contain at least 50% low-risk media. If the investment horizon is longer than 10 years, the non-risky share may fall to 30%.

Balanced profile

The balanced investor seeks a balance between security and return.

The contract must contain at least 30% low-risk media. If the investment horizon is longer than 10 years, the non-risky share may fall to 20%.

This profile includes a share of payments to units of account with funds invested in unlisted companies (also known as « private equity ») for a minimum of 4%.

Dynamic Profile

The dynamic investor looks for high returns and accepts a greater share of risk.

The contract must contain at least 20% low-risk media. If the investment horizon is longer than 10 years, the non-risky share may fall to 10%.

This profile includes a share of payments to units of account with funds invested in unlisted companies (also known as « private equity ») for a minimum of 8%.

The rate of pay depends on the medium you choose to invest your money: euro funds, units of account, or euro-growth funds. Your payments produce interest or capital gains that are reinvested in the contract and in turn produce new gains.

During the contract, you can make arbitrations which will change the remuneration of your contract by changing the distribution of your investments.

The euro fund has a capital guarantee in return for a low return. The insurer pays annual interest which is added to the capital and in turn produces interest.

Units of account carry a risk of capital loss in return for a possible more attractive return. The value of units of account may vary upwards or downwards depending on the financial markets.

The profitability of your policy also depends on the fees applied by the insurer.

The insurance company may charge you a fee at the time of subscription and during the life of the contract.

These fees are deducted from the value of the funds invested in the contract.

There are 4 types of fees:

  • Application Fee. These fees are fixed and paid upon subscription.
  • Entrance fees. These fees are levied on each payment you make on the contract, at the time of subscription and during the contract. They are flat-rate or proportional to the amount of the payment.
  • Management fees. These fees are levied throughout the term of the contract.
  • Arbitration Fees. These fees are levied on the amount of money transferred from a unit of account to the other. They are lump sums or proportional to the amounts transferred.

If you need money before the end of the contract, you can recover cash by making a redemption (total or partial) or by requesting a advance to the insurer.

Most mixed life and death contracts can be redeemed. However, you must check that your contract provides for this option, we are talking about a redeemable contract.

The advance is only possible if your contract provides for it and under the conditions set by the general rules of the insurer's advances.

FYI  

The right to make a redemption belongs only to the subscriber of the contract. But if the subscriber has lost his legal capacity, the redemption requires the assistance of its curator (if placed under curatorship) or the authorization of the judge (if placed under guardianship). In other protection schemes (family empowerment or future protection mandate), the powers of the person responsible for protection depend on the measure imposed or the warrant.

The insurer cannot object to your redemption request (or in advance if the conditions are met). But you can't act alone if the person you named in your contract has accepted his or her designation as beneficiary.

If the acceptance of the beneficiary has taken place since December 19, 2007 in the forms provided by law, you will have to obtain the agreement of the accepting beneficiary to make a redemption.

If the beneficiary's acceptance occurred before December 19, 2007, you retain the option of making a redemption, unless you had signed a document that showed your clear willingness to waive your right of redemption.

Redemption

Every year, the insurer keeps you informed of the cash value of your contract.

The redemption made by the subscriber is a removal of all or part of the savings accumulated on the life insurance contract. Any redemption includes a share of capital (non-taxable) and a share of gains (interest and capital gains).

The redemption may be total or partial. The buyback will result in the taxation of the contract earnings.

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Total Redemption

The total redemption terminates the contract and leads to the early payment of the capital.

The insurer pays the policyholder the surrender value of its policy which is equal to the available part of the savings (mathematical provision) less the costs (surrender indemnity).

Any redemption indemnities provided for in the contract may not exceed 5% of the mathematical provision. They are prohibited when the buyback occurs more than 10 years after the effective date of the contract.

FYI  

The taxation which applies to the redemption depends on the length of the contract and the date of payment of the premiums. One abatement is applicable for contracts of 8 years or more.

You must apply in writing (by mail or online depending on the insurer). A template letter is available:

Request the redemption of your life insurance policy

Following a redemption request, the payment period by the insurer must not exceed 2 months.

After that period, the unpaid amounts shall bear interest on the legal interest rate increased by half during the first 2 months of delay, then double the legal rate.

Partial redemption

The partial redemption allows the subscriber to receive a fraction of the premiums paid plus a fraction of the acquired savings (gains) without terminating the contract. The contract continues with reduced capital.

The subscriber may make several redemptions (or partial withdrawals) within the limit of the redemption value of his contract.

Partial withdrawals can sometimes be scheduled (for example to provide you with regular additional income).

FYI  

The taxation which applies to the redemption depends on the length of the contract and the date of payment of the premiums. One abatement is applicable for contracts of 8 years or more.

You must apply in writing (by mail or online depending on the insurer). A template letter is available:

Request the redemption of your life insurance policy

The insurer must pay the amounts within 2 months of the request for redemption.

After that period, the unpaid amounts shall bear interest on the legal interest rate increased by half during the first 2 months of delay, then double the legal rate.

Advance

Some life insurance contracts may provide for the possibility of granting advances to the subscriber. The advance allows you to receive a sum without touching the savings accumulated in the contract. The advance is limited to a percentage of the cash value.

The advance is one ready which the insurer has undertaken to grant under predefined conditions. The duration of the advance varies according to the contracts. The subscriber must repay the advance and must pay the interest provided for in the contract.

If the advance is not repaid at the end of the contract, it is deducted from the sums paid by the insurer.

FYI  

Advances are not taxable for tax purposes. However, the unrepaid advance can be considered as a partial redemption, subject to taxation.

You must apply in writing to the insurance company. A template letter is available:

Request information to obtain an advance on your life insurance policy

If you have a life insurance policy, during the term of the contract, and in the absence of a buyback, your earnings (interest and capital gains) are provisionally exempt from income tax.

The social security contributions are levied annually by the insurer on the interest on the euro-denominated instruments at the time of their entry in the account. On unit-linked accounts, social security contributions are only due at the time of the purchase or termination of the contract.

If you make a redemption, the gains (interest and capital gains) from the contract are subject to income tax.

In addition, unit-linked gains are subject to the social security contributions that are levied by the insurer on the occasion of the buyback.

Income from a life insurance contract has different tax regimes, depending on the length of the contract and the period of premium payments. One abatement is applicable on earnings from contracts of 8 years or more.

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