The main drawback of life insurance is often its cost. It combines several layers of costs, of which the saver is not always aware. “In recent years, the issue of fees has been masked by the rise in the financial markets, but the subject is likely to come back to the fore”believes Cyrille Chartier-Kastler, founder of the Good Value for Money site.
Some professionals will say that the end performance is all that matters. This is not entirely true. The distribution of value is also important. Especially since the latter is asymmetrical: the fees are always charged, even when the saver loses money.
The first layer of fresh is the most visible. These are the annual management fees of the contract, which remunerate the insurer. They generally range from 0.50% to 1%, with an average of 0.80%, according to the specialized site Good Value for Money. These fees, deducted from the outstanding amount of the contract, reduce the number of units of account you hold.
These units of account represent investment vehicles, which also bear costs. The latter are the least noticeable, although regulations have recently pushed for better information on the matter. The costs of these funds this time reduce the value of the units of account. They remunerate the management company that manages it, the latter retroceding part of the commission to the distributor who sold you the contract.
A 2.5% to 3% amputation
Their amount varies greatly from one product to another. According to Good Value for Money, ongoing charges in 2022 amount to 2.17% on average for French equity funds, 1.97% for international equity funds, 2.11% for flexible funds, or at 2.28% on real estate collective investment undertakings (OPCI), products combining physical real estate and financial supports.
If these figures are not very telling, one thing is clear. The performance generated by the financial product is cut from the start by 2.5 to 3%. To encourage savers to be vigilant, regulations now require insurers to communicate in detail about these costs.
On the annual statement of your contract, you will be able to know the gross performance of the assets contained in each of your units of account and the details of the fees deducted up to the final performance.
Since 1er July, this information must also be accessible pre-contractually for all the units of account of the contract. When performance is in the double digits, the impact may seem minimal. But with increases of a few percent, it’s much more striking: the performance after costs can be halved!