When it comes to life insurance, you can choose between euro and unit-linked funds. But which of these investment vehicles to choose? Why choose one over the other? Decryption.
Life insurance is the investment most appreciated by the French because of its many advantages. This investment, accessible to all, has the particularity that it allows you to grow your savings, savings available at any time if the need arises. To take out life insurance, whether to finance a project or to use it as a tool for transmitting assets, you have the choice between two solutions. Euro funds, which guarantee the security of your money; and units of account, which are profitable, but risky. Which one to choose then between these two investment vehicles? We tell you everything.
Why choose euro funds for your life insurance?
Knowing the difference between funds in euros and units of account (UA), allows you to choose the best life insurance. That said, what mainly distinguishes one from the other is that the capital of funds in euros is guaranteedwhether classic euro funds, real estate euro funds or dynamic euro funds.
A safe investment
The difference between classic euro funds and the others is that the investment here is placed in sure titles. These may be government bonds. The latter moreover represent approximately 80% of this investment, the remaining 20% being invested in equities and/or real estate.
In addition to the fact that the capital is guaranteed in these investments, you should know that they are accompanied byannual interest in the form of dividends or capital gains. This is one of the main advantages of life insurance. These interests are acquired once and for all and do not decline, regardless of the evolution of the market. This is called theratchet effect.
What characterizes the euro real estate funds beyond the guaranteed capital, it is that they are mainly invested in real estate and 35% in bond issues. The return on this investment medium is slightly higher than that of conventional euro funds.
As to dynamic euro fundsthey bet around 20% on real estate, 15% on equities… and their return exceeds that of conventional euro funds.
Funds in euros nevertheless represent approximately 80% investment vehicles preferred by the French. The security offered by these types of savings or investment vehicles in life insurance results mainly from the fact that they are based on risk free products such as government or corporate bonds. Thus, if you do not benefit from the interest linked to these investment vehicles, you are at least guaranteed to recover the capital invested.
In addition, you should know that the profitability of funds in euros has been steadily decreasing for about 10 years with a vertiginous drop since 2020. In general, however, the profitability of funds in euros varies between 0 and 2%.
Finally, you should know that interest calculated according to the rate in force, you must subtract the fees charged by the insurer. It is therefore necessary to pay attention to the costs applied by each insurer. Likewise, although there is a certain limit or average of returns with funds in euros, the rates may vary greatly from one insurer to another. Therefore, it is essential to compare to choose the best life insurance.
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Why choose unit-linked life insurance?
Unlike funds in euros, which are mainly found in mono-support contracts, units of account constitute an investment support. efficient or profitable, but risky. They are only available in multi-support life insurance contracts.
A risky and potentially very profitable investment
This life insurance support makes it possible to invest in financial products risky, because subject to stock market fluctuations. Despite the share of risk that exists in units of account, it must be said that it is an investment medium with high profitability.
Although your insurer can guarantee you a certain number of units of account, it is unable to guarantee the value. Indeed, at any time, the market can experience an uptrend or a downtrend. This variation necessarily has an impact on profitability.
For example, the profitability of a unit of account can be 4% in one day. And the next day it can drop by 8-10%. In other words, the risk of loss of capital with this investment vehicle is real and high if the money saved is not placed in the right product.
Various products and management methods
The main financial products in which unit-linked investments are made are, on the one hand, actions and the obligationsand on the other hand, the real estate funds. Some designate the transferable securities of undertakings for collective investment (UCITS), investment companies with variable capital (SICAV), mutual funds (FCP). The others meanwhile refer to funds invested in the real estate securities of civil real estate companies (SCI), real estate collective investment bodies (OPCI), civil real estate investment companies (SCPI).
You also have the choice between several management methods to reduce the risk of capital loss:
- You can opt for free management. For this, you have to know finance, understand how the stock market, stocks and other assets work. You also need to have enough time, because it will be up to you to manage your investments.
- You can choose profiled management. In this case, you call on an expert who advises you.
- There is also mandated management. Here, you call on a manager who takes care of your investments alone.
- You also have the option of using managed management. In the latter case, you manage part of your investments yourself.
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In conclusion: funds in euros or units of account – which life insurance medium to choose?
With funds in euros, you opt for the security of your capital. However, with units of account, you choose a profitability potentially high. The latter varies between 4 and 30%. But there is a big risk of losing the invested capital.
Another advantage of unit links is that they allow you to to diversify considerably your portfolio of financial assets. But if you want to have your capital even without any interest, it is better to go for a mono-support life insurance (funds in euros).
In the end, there are two subdivisions in a life insurance contract: funds in euros and units of account. Choosing one or the other depends on your investor profile (including your degree of risk aversion) and your Goals. Euro funds guarantee capital security and offer a low return. Unit-linked units, on the other hand, are potentially very profitable, but are also very risky.
Nevertheless, whatever your choice of life insurance support, it is also important to compare the offers before choosing. Indeed, significant and numerous disparities may exist between insurers for the same type of life insurance contract (costs, rate of return, conditions, etc.).