What are the differences between a capitalization contract and a life insurance ?

The july 20, 2022

The life insurance contract is one of the favorite products while the capitalization contract is more discreet. However, there are advantages to choosing one or the other. Wealth A7 explains the differences between these two products:

 

A similar operation

The general principle of life insurance and its operation applies to the capitalization contract. Concretely, a saver places sums on a contract, a contract which will have a certain remuneration. The investment can be made on funds in euros, offering a capital guarantee and on funds in units of account which diversify your savings and can be more dynamic. With a capitalization contract, the saver will be offered the same wide choice of funds as with a life insurance.

However, it must be emphasized that an capitalization contract can also be subscribed by a legal entity, for example a SCI wishing to invest its cash, which is not possible with a life insurance contract.

 

At the time of death

The biggest difference is at the time of death of the contract holder.

For a life insurance policy: in general, the life insurance policy will be unwound at the time of death and the sums will be transferred to the beneficiary. The taxation is particular since for the premiums paid before 70 years old, an allowance of 152 500€ per beneficiary is applied whereas for the premiums after 70 years old, only one allowance of 32 500€ can be used.

For a capitalization contract: a death will not put an end to the contract and it will be integrated into the estate assets. This means that there is no particular regime for this contract, it will be subject to the same tax scale as the other assets of the estate and will therefore benefit from the same deductions.

 

Preparing your estate with a capitalization contract

Life insurance allows you to insert a split beneficiary clause which will attribute the bare ownership to one beneficiary and the usufruct to another upon death. However, it is not possible to dismember the contract or to make a donation. The capitalization contract has a great advantage, because it can be a tool to anticipate and prepare one's succession.

It will therefore be possible to make a donation in full ownership or in dismemberment with this contract. Concretely, the holder can decide to give, for example, the bare ownership of his contract to his child and to keep the usufruct in order to continue to receive the dividends of the product. Moreover, the operation will benefit from the deduction of 100 000€ per child and per parent every 15 years.

 

The choice between a capitalization contract and a life insurance must be made according to your needs and expectations, our wealth management consultants can assist you in the investment of your savings, contact us!

In a world that moves, Wealth A7 is there to bring your desires to life.

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Article by : Darina Attanasio

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