These different ways to tap into your life insurance

Your life insurance is a piggy bank in which you can draw at any time, including on a scheduled basis. The bite tax will often be less difficult than you fear. Mode of employment.

This is the idea received the more prevalent on life insurance : the money would be blocked for eight years. False. Almost all of the contracts traded in the last fifteen years, are to be payments and free withdrawals. In other words, you can contribute whenever you want, but also draw freely, without time constraint. Only the thresholds laid down contractually for these operations you undertake. The eight-year period referred to is tax, with tax rates decreasing as your contract gets older. That is all.

In fact, the investors use of this ability, since they extract, each year, approximately 70 billion euros from their contracts. A growing trend, since the annual amount of withdrawals was $ 40 billion ten years earlier. It is logic : tens of millions of life insurance policies underwritten in the years 1990 and 2000 are now mature tax, which makes it an ideal tool to supplement their income, for example for retirement.

An insurer may not refuse withdrawals

Discuss your particular case now. Prior to any withdrawal on your contract, ask yourself the key question : what will you do with this money ? More specifically, your puncture is definitive, or from time to time with the intention to reinvest in your agreement with the following ? In this latter case, rather than a withdrawal, the solution of the advance must be considered : it is a loan from the insurer, that you pay off in three years without paying fees on instalments.

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conversely, if you do not plan to reinvest on your contract, make a withdrawal (redemption in the jargon). It will either be partial, if you leave money in the account respecting the minimum contractual, or total, which will end your life insurance coverage.

The mechanism of withdrawals is, all in all, pretty simple. According to the law (article L 132-21 and following of the insurance Code), the policyholder of a life insurance policy may recover all or part of his capital, in making a withdrawal or redemption. Has three exceptions : if the beneficiary has accepted the contract, if the latter has been pledged for a loan, or if the capital has been converted to a life annuity.

you need to refer to the general conditions of your contract to know the terms and conditions of withdrawals. There will be indicated how much you can draw at a minimum and the amount to leave to avoid the closing of the contract of a few tens of euros to several thousands depending on the product. If you have a contract multi-media, it will sometimes be possible to choose on what units of account will be withdrawals. In this case, be a shrewd manager : avoid puncturing the media, financial in a lower value, as a withdrawal would make the final. Finally, good news on almost all of the contracts modern, a partial or total withdrawal is free of charge.

An advance rather than a withdrawal

There is an alternative to the withdrawal : advance. It is to have a fraction of your capital, without having to draw. In practice, the insurer you ready a party (it makes you an advance). This is charged at the rate of revaluation of the contract, plus the management fees and profit margin taken by the insurer. Given that your capital continues to grow in all, the actual cost of the advance is equal to the management fees the higher the margin, or 1 to 3 % depending on the company. Attention, some life insurance (among those of the Caisse d'epargne or the Credit Agricole, for example) do not offer this mechanism.

Otherwise, depending on the contract, the amount of the advance is capped at 60 or 80 % of the capital. The advance must be repaid within three years (one time renewable), but without costs on the payments. And most importantly, unlike the withdrawal, the advance is not subject to income tax. Station not to abuse it however. The inland revenue yesterday. In the case of advances or repeated or that are not reimbursed within a reasonable time, it may be requalified in withdrawals.

simple rules Of the next tax

Rest tax. Each withdrawal you make is made up for part of the capital that you have invested and for part of the winnings (if any) generated. Only this part of interest and capital gains will be subject to the tax. How ? You can either incorporate the earnings to your income tax return, to submit them to your marginal tax rate, or opt for the rate of withholding tax rate. The latter is declining over time : 35 % the first four years of existence of the contract, 15 % between four and eight years, and finally 7.5% in past eight years after an abatement of € 4 600 for single people or 9 € 200 for couples. Good to know : for the old contracts of the 1980s and 1990s, more favourable rules apply, including the exemption of the interest earned from payments made before September 26, 1997.

An important clarification : before any withdrawal, you must inform your insurer that you opt for the withholding tax, otherwise it will use office the other solution.

The calculation of the share of gains in repurchases

You probably have the issue of the calculation of this share of the gains. How the irs does it ? If the withdrawal is total, in other words, if you close your contract, it is simple, the interest is taxable is &hasserious; the difference between the amount you receive and the principal you have paid. In case of partial withdrawal, it is much more complex. The tax administration applies the following formula : earnings = amount of the partial redemption - (total payments to the date of redemption x redemption amount partial/contract value at the redemption date).

Example : you have placed 50 000 euros on a contract, fee payments included. You make a withdrawal of 10, 000 euros a few years later, while the contract is worth € 55 000. What is the share of earnings included in the withdrawal ? Apply the above formula. Winnings = 10 000 - (50 000 x 10 000/55 000) = 909 euro. It is this sum which will be taxed. If you opt for the withholding tax, it will be taxed at 35 % if the contract has less than four years (318 euro), a 15 % if it has between four and eight years of age (136 euros), to 7.5% in past 8 years (68 euros). In this latter case, taking account of the rebates provided (4 600 and 9 200 euros), the tax will be zero !

It is possible to not leave anything to the irs

All accounts made, this tax system is lenient. Even if you have a contract of less than four years, the rate of 35 % wears on a little bit of interest, which is equivalent, in our example, a puncture of 3.18 % on the withdrawal of 10 000 euros. Spent eight years in prison, thanks to the exemption, you can make redemptions without leaving a penny to the tax authorities. Tip : if you are planning a large withdrawal, it out over two calendar years to benefit twice from the tax abatement. Last tip : if you have a good contract, do not close it. Let the few euros contractually required. Maybe one day, you can again save money on the life insurance.

The modus operandi of a redemption is more or less simple and fast according to the insurers. On this point, they progress at different rates. Some allow you already make your withdrawal requests online, with a treatment in a few days, as the Macif which has put in place one of the best after-sales services market via its subsidiary, Mutavie.

More generally, the treatment will take two to four weeks, or more, the time that your application is processed by your advisor and it will be relayed to the insurer. Except to choose your company, don't rely on your life insurance in order to have funds very quickly.

additional income regular

How to proceed if you want to get a regular income ? Theoretically, this is equivalent to performing a regular application of a partial withdrawal. Tedious. On this point, the companies have almost all improved their contracts with an automation of withdrawals under a deadline, and an amount predefined. For example, 500 euros, directly transferred on your bank account, on the 10th of each month. This option - often free - is useful for retirees in search of additional income. Or to finance a health care facility. For tax purposes, you will leave little feathers. It is possible to stop these withdrawals at any time and resume later. Use, overuse of this flexibility, it is your right.

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life Insurance rates / returns contracts

Two types of life insurance are worth more than a life Insurance : how to earn more life Insurance : what to do in the face of declining rates?

There is, however, a more radical solution for the levying of regular income : the transformation of the capital of the contract into a life annuity. The income obtained, calculated according to your age, in particular, is then guaranteed for life. But this choice is irrevocable and in the event of death, the capital is not passed on to the beneficiaries.