Within your life insurance contract, it is possible to take out a floor guarantee which corresponds to death insurance. But does this foresight, with its variable cost, present any real interest?
Do you know the floor guarantee? This is an option which guarantees the beneficiaries of a life insurance contract that they will receive the initial sums invested by the subscriber, even in the event of a loss in value.
Indeed, alongside the payments made on the 100% guaranteed euro fund, it is possible to bet on the units of account, the capital of which is not guaranteed. Riskier supports therefore and which are subject in particular to the evolution of the financial markets. But the minimum guarantee makes it possible to avoid possible losses on these units of account for the heirs. However, is this option really interesting?
Who is the floor guarantee for?
When you pay 100% of your savings into a fund in euros, there is no point in taking out a minimum guarantee. In a life insurance market context where, for several years, there has been a sharp increase in investments in units of accountshe did everything in her place, analyzes Stellane Cohen, president of Altaprofits.
Indeed, faced with the drop in returns on euro funds, savers are increasingly encouraged to make part of their payments into units of account. Thanks to them, the saver can potentially obtain a greater return. But in return, he takes the risk of losing all or part of your capital.
Life insurance: poor performance of units of account
This minimum guarantee can be recommended when there are units of account in the contract which are exposed to market fluctuations, and in particular if they are at a high grade on the risk scale, 6 or 7 for example. If the death of the subscriber occurs when the markets are down, with the death guarantee, the beneficiary is protected. It can also be relevant if the subscriber has chosen structured funds, because death can occur before the fund matures, adds Stellane Cohen.
But investment in units of account is not the only reason for subscribing to the minimum guarantee. According to the director of Altaprofits, if the sums presented in the contract are substantial and the objective of the life insurance contract is transmission, it has an interest. Stellane Cohen admits, however, that this guarantee is poorly subscribed to. Moreover, certain contracts automatically include this minimum guarantee.
The cost of the floor guarantee
If it is optional, how much does this floor guarantee cost? Difficult to indicate precisely. In fact, this will depend on the type of guarantee chosen, the age of the subscriber and the capital at risk (i.e. the difference between the amount of premiums paid and the value of the contract on the day of death). The price of this insurance is added to the management costs of your life insurance contract. The calculation method varies depending on the contract and the contribution can be taken with the management fees or from the outstanding amount of the contract.
note that to subscribe to this minimum guarantee, the insurer may require a health questionnaire and, or a medical visit, depending on the age of the subscriber.
Life insurance or death insurance, which contract should you choose?
4 different floor guarantees
- There simple floor guarantee. The minimum amount paid to the beneficiary is equal to the accumulation of payments carried out by the subscriber. Example: You have made payments of 100,000 euros, your beneficiaries will receive 100,000 euros, even if your contract has suffered capital losses. Withdrawals or advances which have taken place on the contract will however be deducted.
- There index floor guarantee. A indexation rate is applied each year on the cumulative payments for determine the minimum amount paid to the beneficiary. Example: You have around 100,000 euros on your life insurance contract with an indexation rate of 3% and you have made no further payments thereafter. If your death occurs after 10 years, your beneficiaries will receive at least 130,000 euros.
- There ratchet floor guarantee. The capital towards corresponds the highest value reached in the life of the contract. To benefit from this option, an age limit can be defined by the insurer. Example: If you have around 100,000 euros on your contract and its value drops to 70,000 euros after reaching 120,000 euros, the beneficiaries will still receive 120,000 euros.
- There increased floor guarantee. The amount paid upon death is defined by the insured. A increase coefficient leans against it. Example: If you have 150,000 euros on your contract and you have chosen to transmit the entire amount with an increase of 120%, the beneficiaries will receive 180,000 euros.
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