10 things to know before taking out life insurance in Luxembourg
To protect your loved ones, life insurance should be considered. But before signing a contract, do you know enough about this financial product? Discover our answers to the questions you ask yourself!
In a few words, what is it?
This type of insurance is generally long-term and is a form of savings : it will be your heirs who will benefit when you die.
Concretely, you will place money periodically until the end of your life.
Are there fees?
Each time you make a payment of capital, you will have to pay an entrance fee , which can go up to 5%. Nevertheless, it is quite possible to negotiate them. You will also find that if you opt for a contract only available online, this type of fee may simply not exist.
Management fees can also be collected annually. They are usually around 1% and are deducted from the amount you have saved. Some companies will offer a regressive rate: the more you save, the more the costs are minimal.
Note that all fees that may be charged to you must be written on your contract in black and white. Before signing it, it is better to read it carefully, so as not to be surprised during the first samples taken.
Who do I turn to?
If you subscribe with a bank or an insurer , you will be obliged to take his products, no other choice will be offered to you. To avoid this, you can go through a broker .
The latter enjoys a certain independence and will be able to advise you the most suitable products to your profile, regardless of their origin. To do this, he will carry out a market study before making a proposal.
Is it risky?
The notion of risk is different from one person to another. Nevertheless, to minimize possible losses, the option " funds in euros " is the most appropriate. Here, no risk of losing the amount invested, it will always remain the same: only the amount of interest will vary. If you are willing to put yourself at a bit more risk, so you get better returns, you can opt for stock market shares or consider investing in real estate .
Between the two possibilities, your heart swings? You can mix the media, so that you are certain, whatever happens, to still reap some benefits.
To play the card of security, you also have the possibility of having several life insurance contracts. You divide your money between different banks / banks online / insurers / etc., so as to protect you if one of them came to know problems solvency. That being the case, do not go too far, at the risk of your management becoming chaotic.
How to designate my beneficiaries?
By subscribing to your contract, you will be asked to complete a beneficiary clause: it exists in "default" version, and designates your spouses and children (born or unborn), as beneficiaries of your life insurance .
However, you are under no obligation to opt for this imposed clause, you can customize it, by entering yourself the name of your heirs, and the distribution of capital for each of them.
This clause is modifiable throughout your life, it is not fixed at the time of your signature of contract.
Can I touch the money invested?
Yes, you can benefit from the capital you have placed, at any time , but also without any fees (unless you have chosen a product to maturity, and that it has not yet passed).
How much to bequeath?
To help you, make a list of your monthly expenses : shopping, transportation, housing, children's school fees, etc. This determined amount, you will have a better view of the lifestyle you and your loved ones lead, and will more easily determine how much money they will need to continue to live identically after your disappearance.
Also consider how much money your family needs to fund your funeral so that they can pay for it without embarrassing themselves.
Your calculations made, you see the period during which you want to put them safe . Even if for the moment, you can only invest an amount that seems ridiculous, do it. In the future, if your income is growing, you can increase your life insurance coverage. Better is a modest insurance rather than no insurance at all.
All this established, you see for what period you want to shelter your loved ones. Even if you can invest an amount that seems derisory to you, do it. If in the future your income increases, you can increase your life insurance coverage. Better modest insurance than no insurance at all.
Subscribe life insurance, it's complicated?
No, especially since today, you can directly do it yourself, via internet . From your home, you can also contact an advisor by phone who can guide you through the subscription process.
Can I transfer my contract?
It's impossible to move from one bank / insurer to another . That said, you can at any time terminate your contract with the organization where you have one. Before carrying out this operation, it is better still to inform you because it could cost you to close it, mainly from a tax point of view. Sometimes, it is better to leave your life insurance like this, and simply not to pay any more money. Another possibility exists: buy back your insurance, periodically withdrawing the capital.
Is it advantageous for tax purposes?
As a policyholder, whether you are a Luxembourg resident or a frontier resident, you will enjoy tax deductions. For you can deduct the premiums of your life insurance, by mentioning the amount on your tax card.