Life Insurance in 2023: Advantages, Disadvantages, Alternatives, and How to Make the Right Choice for Your Financial Goals

Are you hesitating to invest your money in life insurance in 2023? Discover the advantages and disadvantages of this investment, its taxation, its alternatives and how to make the right choice according to your financial objectives. Take control of your financial future now!

In the vast galaxy of investment, life insurance occupies a central place, often hailed for its flexibility and profitability. However, in 2023, is it still a wise option? Let’s dive into the world of life insurance to see more clearly.

What is life insurance?

Before embarking on the debate on the relevance of investing in a life insurance in 2023, it is essential to understand what this investment product really is.

Contrary to what its name might suggest, life insurance is not insurance in the traditional sense of the term, such as health insurance or death insurance. In reality, it is an investment contract between a subscriber and an insurer. The subscriber invests a certain amount of money, either all at once (we then speak of a single payment), or at regular intervals (we then speak of periodic payments).

The money invested in this way is then managed by the insurer, who places it in different investment vehicles: funds in euros, which are generally safer but offer a lower return, and unit-linked funds, which can be more risky but also potentially more profitable. There is also a third type of support, SCPIs, which are real estate investment companies.

Life insurance offers great flexibility in terms of management. The subscriber can choose to manage his contract himself, by selecting the media in which he wishes to invest (we then speak of free management), or else entrust this task to the insurer (we then speak of controlled management).

Finally, life insurance is also a tool for transmitting assets. In the event of the death of the subscriber, the accumulated capital is transmitted to the beneficiaries designated in the contract, with often advantageous taxation.

Now that you know what life insurance is, we can look at whether it’s a good idea to invest in it in 2023.

Life insurance: a flexible investment option

The life insurance contract: a flexible tool

Life insurance is not just an insurance contract, it is also an investment product. Its flexibility lies in the fact that it allows the investor to choose between two types of investment vehicles:

• Funds in euros: These are safe investments that guarantee the capital invested and offer an annual return.
• Units of account (UA): These media are linked to the financial markets and therefore offer a higher potential return, but with a risk of capital loss.

Guided management: an option for the modern investor

Managed management is an option offered by many life insurance contracts. It allows investors to delegate the management of their capital to professionals. This choice can be wise for those who do not have the time or the expertise to manage their investments themselves. Contracts like the Linxea Spirit offer this type of management.

SEE ALSO: What are the advantages of life insurance?

The benefits of life insurance in 2023

Advantageous taxation and partial redemption

The taxation of life insurance remains one of its main strengths in 2023. In the event of partial or total redemption, capital gains are subject to reduced taxation after 8 years of holding the contract. In addition, in the event of death, the capital transferred to the beneficiaries also benefits from advantageous taxation.

Diversification of investments with SCPIs

In 2023, real estate investment companies (SCPI) will be an integral part of life insurance contracts. These supports make it possible to invest indirectly in real estate, thus offering additional investment diversification. Life insurance in euros and units of account can be supplemented by SCPIs for a diversified and balanced investment strategy.

Things to consider before buying life insurance

Choosing the contract: a crucial step

Not all life insurance policies are created equal. Some offer a wider range of investment vehicles, others offer quality managed management, and still others emphasize tax advantages. Before taking out life insurance, it is therefore essential to compare contracts and take into account the opinions of experts and customers.

The performance of the contract: an element not to be overlooked

The return on life insurance depends largely on the performance of the investment vehicles chosen. In 2023, with an uncertain economic context, it is more important than ever to closely monitor the past and anticipated performance of euro and unit-linked funds. Of course, past performance does not guarantee future performance, but it can give an indication of contract management.

The importance of diversification

A well-known adage among investors says: “Don’t put all your eggs in one basket”. This is especially true for life insurance. Diversifying your investments between funds in euros, unit-linked funds and SCPIs can reduce risk and optimize the performance of your contract.

What are the alternatives to life insurance to invest my money?

There are several alternatives to life insurance to invest your money. However, each option has its own advantages and disadvantages. It is therefore essential to choose the one that best suits your situation and your objectives. Here are some of the most common:

• Equity Savings Plan (PEA) : It is a savings product that allows you to invest in European shares while benefiting from advantageous taxation after 5 years. However, the PEA is more risky than life insurance because it is directly exposed to fluctuations in the financial markets.
• Retirement Savings Plan (PER) : It is a long-term investment solution that allows you to build up capital for retirement while benefiting from tax advantages. However, the money invested in a PER is generally blocked until retirement.
• Livret A and other savings accounts : These are risk-free investments that allow you to have your money at any time. However, their yield is generally lower than that of life insurance.
• Property investment : Whether through the direct purchase of real estate or via SCPIs, real estate can be an interesting alternative to life insurance. However, it requires a larger initial investment and carries risks related to the real estate market.

Remember that the choice of investment depends on your financial situation, risk tolerance and long-term goals. It may be a good idea to diversify your investments to reduce risk and maximize the potential return.

SEE ALSO: Shares on the stock market or cryptocurrency: what to choose to invest?

Conclusion: Life insurance, an investment that is still relevant?

Investing in life insurance in 2023 seems to be an always interesting option, despite a sometimes unstable economic context. Its flexibility, its advantageous taxation and the possibility of diversification that it offers make it an investment of choice. However, the success of this investment largely depends on the choice of contract and its management. An informed approach and a well-thought-out investment strategy are therefore essential to get the most out of life insurance.