Definition of life insurance

Definition of life insurance
What is life insurance?
Definition
Life insurance is a financial investment that allows the subscriber to save money with the aim of passing it on to a beneficiary when an event related to the insured occurs: his death or his survival. This savings product allows the subscriber to earn interest on his contract based on the capital invested.

In the event of the subscriber's life, he remains the beneficiary and holder of the funds and can freely recover the capital and interest.

In the event of the subscriber's death, the contract will be unwound and the capital and interest will be transferred to the beneficiary (ies) of his choice (children, spouses, partner, brothers and sisters, etc.)


Life insurance is mainly used nowadays as a contract to save money by benefiting from the advantages of the taxation of life insurance combined with those related to the transmission of wealth. The contracts are open with the aim of preparing for retirement, building up term capital or anticipating a real estate project.

However, it is important to distinguish between death insurance and life insurance. In a death insurance contract, the insurer undertakes to pay a fixed capital or annuity to the beneficiaries designated by the insured in the event that the latter dies before a certain date. Death insurance is generally taken out to allow the family to repay a loan or to pay for the children's education if the insured dies suddenly.

Investment supports
There are two compartments in a life insurance contract:

Funds in euros that offer a capital guarantee
Units of account (UC) which do not offer a guarantee on the capital and which are invested in units of SICAVs, SCIs, SCPIs, FCP or trackers, themselves mainly invested in real estate, shares or bonds.
Funds in Euros
The fund in euros of a life insurance contract is a secure medium which includes a capital guarantee offered by the insurer. The subscriber cannot therefore lose money on this type of fund.

Each year, interest is paid on the contract on December 31, N. The interest acquired by the subscriber is definitively acquired (ratchet effect). The return on the euro fund is made up of a technical rate (minimum guaranteed rate) and profit sharing.

Units of account
A unit of account (UC) refers to an investment medium in a life insurance contract that does not offer a capital guarantee. The subscriber can invest in different asset classes through units of account such as stocks, bonds and real estate. A UC can have a negative return in the event of a fall in the financial markets, which generates a loss for the subscriber (loss of part of the invested capital).

The shares and bonds are grouped together in Collective Investment Schemes (UCITS). There are many forms of UCITS (money market, bond, equities, hedge funds, formula and diversified funds).

Behind the term UCITS there are two distinct legal statuses:

SICAVs (Variable Capital Investment Companies)
FCPs (mutual funds)
Finally, we can cite trackers (listed index UCITS) whose performance replicates a financial index (the CAC 40 for example).

For real estate, there are many supports such as:

SCI (Civil Real Estate Company)
SCPI (Civil Society of Real Estate Placement)
OPCI (Collective Real Estate Investment Organization)
The expected rate of return on units of account is higher than on the euro fund in return for a capital risk.