Different types of investment (P.2): insurance products

Simone-Christelle NgoMakon
May 31
9 min read

안녕하십니까 (annyeonghasimnikka) royal priesthood! 안녕하세요 (annyeonghaseyo) co-heiress! "Know this, he who sows sparingly will reap sparingly, and he who sows bountifully will reap bountifully. Let each one give as he has decided in his heart, without regret or constraint, for GOD loves a cheerful giver." (2 Corinthians 9:6-7, Segond 21) GOD never said to just pray and sow (Proverbs 6:6-10). May GOD answer your prayers, instruct you, inspire you, guide you, bless the work of your hands and preserve you.

Interest-bearing savings
Insurance products
A. Two types of insurance products: insurance and insurance products
B. Savings insurance products (France)
C. Tips and points of attention

Tontines
Unlisted financial securities and partners' current accounts
Listed financial securities and currencies
Digital assets
Material goods
Real estate
Land and agricultural investments
Investment in human capital
Entrepreneurship, cooperatives and holding companies (groups of companies or portfolio companies)

"He who acquires good sense loves himself; he who keeps understanding finds happiness." (Proverbs 19:8, Segond 21)

"Precious treasures and oil are in the dwelling of the wise; But the foolish man swallows them up." (Proverbs 21:20, LSG)

"Cut the grass in the fields and, while new grass is growing, gather hay on the mountains. Get sheep to make clothes for yourself, goats to buy a field. The milk your goats give in abundance, use it to feed yourself, your family and your maids." (Proverbs 27:25-27)

Banks store money, lend money and carry out financial transactions on behalf of their customers (natural and legal persons). Their sister business, insurance, covers risks and guarantees goods and services. Insured are natural persons (individually or collectively), legal entities, goods and activities.

Insurance products are containers, not assets. Assets are the ingredients of the investment. Envelopes are containers for ingredients. Assets generate losses or gains. Envelopes define the rules for management, taxation, tax exemption, transfer or payout. Assets can be purchased with or without an envelope. The interest-bearing savings listed in the previous article are assets outside the envelope.

A. Two types of insurance products: insurance and insurance products

Insurance products are services provided by insurers to policyholders and/or their beneficiaries, in return for the payment of a premium or periodic contributions, if the latter fall victim to a specific, uncertain or random loss, incident or event. Insurance products are offered by insurance companies and banks. Banks offer these products either in partnership with insurance companies, or on behalf of the insurance company belonging to the banking group.

The insurer's policyholder or client is the person with whom the insurance contract has been signed. In other words, the person who pays the premium or contributions. Insureds are the people for whom insurance policies are taken out. They may be the policyholders themselves and/or other people (family members, employees, etc.). Beneficiaries (in the case of accumulation products) are the people designated by the policyholder on the contract to receive a capital sum or annuity in the event of the insured's death.

There are two types of insurance products: non-repayable insurance products, commonly known as insurance, and capitalization products, commonly known as insurance.

Non-returnable insurance products, commonly known as "pay-as-you-go" insurance: premiums are lost if no event occurs. The insurer distributes the premiums (contributions) paid by policyholders to cover claims.

In this category are :
- Health insurance, complementary or mutual health insurance and health cover (accidents of life).
- Classic provident plans (death insurance, credit insurance, income insurance, etc.), complementary provident plans and provident guarantees (disability, hospitalization, funeral).
- Other insurance (vehicle, home, etc.).

Please note : insurance companies assume or reimburse expenses. Supplementary insurance covers or reimburses expenses not reimbursed by insurance. Contingency plans provide financial support in the event of temporary incapacity (illness, job loss, pregnancy, etc.), disability or death.

Capitalization products, commonly known as insurance products: sums paid in are recoverable and may be increased by compound interest. The insurer uses the premiums to build up capital. The allocation may be total, partial, automated (made by the insurer) or free (made by the policyholder). Policyholder contributions are not pooled, but deposited in nominative accounts. The insurer capitalizes the premiums paid by policyholders. This category includes retirement and savings insurance products.

B. Savings insurance products (France)

Retirement savings plans are tax-advantaged savings and investment envelopes, with the constraint that savings are frozen until retirement, except in exceptional cases. 🙂 I'll leave it to you to find out about the specifics of your country and situation.

In France, savings insurance products include life insurance, capitalization contracts, company savings plans (PEE), time savings accounts (CET) and share savings plans (PEA insurance, not to be confused with the bank PEA).

Life insurance is a savings and investment contract. After savings books, it's France's favorite investment. The insurer invests and/or remunerates the subscriber's savings. To build up savings or capital, the subscriber (the customer) pays money into a contract, to be invested in savings products (SCPI, bonds, etc.). In France, a teenager aged 16 or over can take out a life insurance policy on his or her own. An adult can take out as many life insurance policies as he or she wishes.

The money can be paid in one or more instalments. He can withdraw all or part of his savings before the end of the contract. This is known as surrender. Total surrender means that the subscriber recovers all the sums he or she has saved. In doing so, he/she automatically closes the contract. If the surrender is partial, the contract continues to earn interest. Only the interest and capital gains generated are taxable. In France, after eight years, the policyholder benefits from advantageous tax treatment. If a surrender is made before the eighth year, the rate of taxation on interest and capital gains will depend on the age of the contract.

Only the policyholder may request the surrender of his or her life insurance policy. Neither the insured (if different from the policyholder), nor the beneficiaries (designated on the contract), may request surrender. However, if the beneficiary has signed a clause in the contract, the policyholder must obtain his or her written authorization in order to request surrender. In the event of death, the contract is unwound and the capital acquired is paid to the beneficiaries designated on the contract. The list of beneficiaries can be modified at any time.

A life insurance contract can be made up of various types of financial products, with different levels of risk.

Single-support or currency contracts, known as euro funds: The policyholder's savings are invested in a guaranteed fund. Capital is guaranteed regardless of market trends. The insurer commits to a minimum rate of return. The capital increases from year to year (compound interest), but very often at a rate lower than or equivalent to that of inflation.
- Please note: Captal and interest are guaranteed unless the insurance company goes bankrupt or a major event occurs in the country (government bankruptcy, war, etc.).

Multi-support contracts, known as unit-linked funds in Europe or money-market funds in Canada: the amounts invested and potential gains are not guaranteed. The value of each unit may rise or fall. The subscriber may choose one or more investment vehicles (equities, trackers, bonds, collective investment schemes, real estate funds, etc.). The investor's shares are called units of account. Over the long term, returns are often far superior to those of guaranteed fund contracts. The risk of losing capital is real. That's why it's advisable to mix the two forms to optimize returns.

The capitalization contract is above all a tax wrapper enabling you to optimize the transfer of your capital during your lifetime. It operates in the same way as a life insurance contract, with the following differences:

The contract can be taken out by a legal entity or an individual.
The death of the policyholder does not entail closure of the contract. Heirs can keep the policy and pass it on to their descendants.
The policyholder can pass it on to his or her heirs during his or her lifetime, enabling them to benefit from tax advantages.

Many believe that the "contrat de capitalisation" is a French speciality. The term "contrat de capitalisation" may be a French specificity. But this type of contract exists in all wealthy countries.

The Plan Épargne Entreprise (PEE) is a collective savings and investment scheme (envelope) open to employees of a company or group, and to managers of small businesses, enabling them to purchase securities under advantageous (mainly tax) conditions. The savings plan can be set up by a single company (PEE), by a group (PEG for group savings plan) or by companies not belonging to the same group (PEI for inter-company savings plan). The plan is funded by voluntary contributions, deductions from salaries or bonuses, time savings accounts and transfers from other employee savings plans. Employee contributions can be supplemented by company contributions. These are referred to as matching contributions. For example, for monthly savings of X, the company agrees to top up X by an amount of Y or a percentage of Z. The sums are unavailable for a given period (5 years in France). Early release is possible under certain conditions.

A security is a financial instrument that represents a right of ownership or claim on an asset. A security is said to be movable because, unlike real estate, it is easily negotiable and exchangeable on the financial markets. Examples of transferable securities are shares, bonds, units in exchange-traded funds (trackers or ETFs), negotiable debt securities, units in investment funds, investment certificates, and so on.

The Time Savings Account (TSA) does not exist in all European countries. It's a system that allows employees to put unused leave, unused rest periods or various types of income (bonuses) into an account. The conditions of use are specific to each country, company and business sector. The amounts in the time savings account (valuation of days) can be added to the group savings plan, the retirement savings plan or converted into additional remuneration.

The Plan d'Epargne en Actions (PEA) is a securities account that holds shares in companies (listed and unlisted) in the European Union, as well as units in collective investment schemes with at least 75% invested in European company shares. The PEA PME is designed to finance small and medium-sized enterprises (SMEs) and mid-sized companies (ETIs).

The insurance PEA is less famous than the bank PEA. The PEA assurance is offered by insurance companies. The PEA assurance is a unit-linked capitalization contract, offering all the advantages of the PEA bancaire. It combines the advantages of two tax wrappers: a bank PEA and a capitalization contract. The insurance PEA is therefore subject to the same holding and duration rules as a bank PEA. In the event of early partial redemption, the PEA assurance envelope will be converted into a capitalization contract. As with the bank PEA, there are also insurance PEA PMEs. In France, it is forbidden to hold two classic PEAs and two PEAs PME. Either the PEA is held in a bank or in an insurance company. It is advisable to open your PEA and PEA PME in the same establishment (to save on fees). It is not possible to open a PEA for a minor. However, an adult can have as many securities accounts as he or she wishes.

C. Tips and points for attention

🙂 My guiding principle is: Start early + Start small + Analyze + Progress + Diversify + Optimize. Beforehand and in parallel, pray and give for the expansion of the Kingdom.

If you have accounts in several establishments (banks, insurance companies, investment platforms), several envelopes or various investments, as far as possible, I advise you to have a tool to track the evolution of your accounts and investments. For example, the Finary application.

Make choices based on your personal goals, your risk tolerance level, the situation in your country and the inner witness given to you by the HOLY SPIRIT. There are beautiful stories and long nightmares everywhere.

In many countries, insurance companies fail to notify beneficiaries when the policyholder dies. Even in France, this happens regularly. That's why, when you take out a life insurance policy, you need to make sure that, in the event of death, the beneficiary or beneficiaries (heirs) will be informed. You should review your contract every five years, and check that the names, addresses and identity documents of the beneficiaries have been properly filled in. If you prefer, you can include a copy of your contract in your will.

In some establishments, insurance contract management fees are enormous. For some, it's an anarchy. That's why performance shouldn't be your only criterion. Knowing how much it will cost you is just as important.

🙂 Take a long-term view. For example, if you're getting ready to apply for a mortgage, it might be a good idea to start with bank life insurance. If the amount to be borrowed is below a certain threshold, you can ask for bullet repayments or annual repayments (instead of monthly instalments). In the meantime, every month you deposit an amount of capital in your life insurance account (single-support). Your capital earns interest, which you receive after you've repaid your loan.

Don't invest in what you don't understand. It's your money. Even if the insurance advisor is your brother, your coach, a brother from your church or community. You're not his employer. Ask questions.